B. Virtuous Cycle of the Economy amid Longstanding Shortages of Labor Let me now turn to structural changes in Japan's economy. Since around 2017, amid longstanding shortages of labor, some distinctive developments continue to be observed, such as moderate growth of the economy, the positive output gap, non-deflationary price rises, and an increase in business fixed investment.
This suggests that the simultaneous progress of these interacting developments has contributed to the sustained operation of a virtuous cycle in Japan's economy. 10  The positive output gap has been maintained as labor shortages continue amid a growing elderly population and a declining working-age population, coupled with the expansion of demand induced by monetary and fiscal policies.