With respect to inflation expectations -- a major factor influencing the sticky CPI -- the Bank's Tankan (Short-Term Economic Survey of Enterprises in Japan) shows that, while firms' inflation outlook for one year ahead -- or that for the short term -- in particular has recently risen, increases in the outlooks for three years ahead and five years ahead -- or those for the medium to long term -- have been relatively moderate (Chart 10).
When domestic developments warrant, the BSP will move toward smooth normalization of our time-bound measures, consistent with our data-driven approach to monetary policy. Latest baseline forecasts show inflation – which averaged 2.6 percent in 2020 – will remain within the 2.0-4.0 percent target range this year and in 2022.