This is the basic idea of “purchasing power parity.” So, if we look at the purchasing power parity of the yen against the U.S. dollar (the ratio between prices in Japan and the United States), we see that the yen has been appreciating fairly consistently against the dollar, reflecting the weakness in Japanese prices relative to those in the United States since the introduction of a floating exchange rate regime in 1973 – even though the actual dollar/yen exchange rate is determined by a number of factors in addition to prices (Chart 5).
In the introductory statement to the October press conference, the ECB retained the link between asset purchases and inflation, namely that asset purchases will continue until there is a sustainable convergence of inflation towards your definition of price stability – below, but close to, 2%. Why?