To this end, the output gap, which is one of the factors that determine the underlying trend in inflation, is more or less unchanged, as the tightening of labor market conditions has continued while an improvement in manufacturers’ capacity utilization rates has been delayed against the background of the sluggishness in exports and production.
Going forward, the output gap is expected to move into positive territory and gradually increase further from the second half of fiscal 2016, albeit with fluctuations due to the frontloaded increase in demand prior to the consumption tax hike, with an increase in capacity utilization rates as exports and production are likely to pick up.