The CPI for all items less fresh food is projected to be in the ranges of minus 0.6 to minus 0.4 percent for fiscal 2020, 0.2 to 0.5 percent for fiscal 2021, and 0.5 to 0.8 percent for fiscal 2022. Of course, this outlook entails extremely high uncertainties, since it depends on the consequences of COVID-19 and their impact on domestic and overseas economies.
If the strict public health measures are reinstated, economic activity could be constrained significantly again. Moreover, attention should be paid to whether the second-round effects of a shock from COVID19 will significantly depress the economy. Specifically, whether the liquidity problem will shift to a solvency one and affect the financial system, thereby further pushing down the real economy, should be monitored.