The real rate will then become minus 0.5 percent by subtracting the inflation expectation of 1.0 percent from the nominal rate of 0.5 percent. This example suggests that, even if the nominal rate is 0.5 percent, as long as the inflation rate remains at 1.0 percent, the purchasing power of JGB holdings after a year will go down by minus 0.5 percent.
Likewise for cash, given that its nominal rate is 0 percent, the purchasing power  BIS central bankers’ speeches  3  of cash holdings after a year will decline by 1.0 percent if the inflation rate is 1.0 percent. Indeed, the real rates derived from the JGB yields have been declining moderately as a trend since end-2012 (Chart 2).