In countries such as the United States, people’s inflation expectations are anchored at the level around the target set by the central bank, and medium- to long-term inflation expectations are little affected by the decline in the observed CPI; on the other hand, in Japan, where deflation has dominated for a prolonged period of time, formation of inflation expectations tends to be strongly affected by the observed CPI.
In addition, relatively weak developments in private consumption observed recently seem to affect firms’ price-setting stance. Putting off of price increases by some firms has been observed since the turn of the year, mainly in goods such as food products and durable consumer goods. Looking ahead, however, the rate of increase in the observed inflation rate is expected to accelerate again.