Although Japan's economy, mainly the export sector, has been affected by the slowdown in the global economy, domestic demand such as business fixed investment has remained firm. Thus, the Bank judges that the economy has been on a moderate expanding trend, with a virtuous cycle from income to spending operating.
This also can be confirmed by an indicator called the output gap, which represents the balance between demand and supply in the economy as a whole (Chart 2). A positive output gap shows excess demand, whereas a negative output gap indicates excess supply. The gap became positive around 2017 and thereafter widened within positive territory on the back of the economic expansion.