However, under the deflation that lasted for over 15 years, medium- to long-term inflation expectations appear to consistently remain lower than those in the United States. The challenge is to re-anchor these expectations at around 2 percent, comparable to the level in the United States.
What I consider important as factors that determine people’s medium- to long-term inflation expectations are not just the past developments in the inflation rate that I mentioned earlier, but also developments in the overall economy and in asset prices, as well as forward-looking expectation formation based on, for example, wage revisions.