Looking ahead, a virtuous circle among production, income, and spending is expected to continue, and Japan’s economy is projected to grow, as a trend, at a pace above its potential. On the price front, the year-on-year rate of increase in the consumer price index (CPI) for all items less fresh food has recently been accelerating to a range between 0.5 and 1.0 percent.
With the prospect of an improvement in the aggregate supply and demand balance and a rise in medium- to long-term inflation expectations, the year-on-year rate of change in the CPI is likely to follow a rising trend. Therefore, Japan’s economy has been following a path toward achieving the 2 percent price stability target as expected.