In forecasting price developments, close watch should be kept on changes in firms’ price-setting behavior. Price increases could spread gradually if private consumption remains resilient and firms are encouraged to raise prices. (b)  Challenges for Japan’s economy  In order for the economy to move in line with the outlook I have described, it is necessary for production levels to rise firmly.
The sluggish pace of increase in exports appears to have caused industrial production for the first half of 2013 to remain lower than a year earlier. As a result, business fixed investment remains lackluster, restraining growth in production. In the past, exports were usually the driving force of economic recovery in Japan.