So far, medium- to long-term inflation expectations have been mostly in positive territory as a trend, while actual prices have long been on a declining trend. Consequently, price stability has not been achieved, and thus the economy has been in an undesirable situation. This is the background to why it became necessary to introduce QQE.
However, I think that medium- to long-term inflation expectations in Japan are mainly determined by supply side factors such as the potential growth rate and the labor productivity growth rate, rather than by the level of the Bank’s price stability target and the supply and demand balances in the goods, services, and labor markets.