However, the use of households’ inflation expectations may give rise to an upward-bias problem – an issue that is often pointed out by other central banks. In Japan, households always tend to expect that prices will rise even during a phase of deflation (Chart 5).
The upward bias appears to be generated because households’ inflation expectations are heavily affected by price movements – for example, daily necessities and gasoline. Of course, it is also important to consider firms’ inflation expectations because they ultimately set their own sales prices and wages.