“Households’ medium- to long-term” inflation expectations will increase further if the term for these expectations covers the period in which the two tax hikes occur, but if the term covers a longer period of time the effects of the tax hikes will be diluted.
As April 2014 approaches, short-term inflation expectations may rise further, and in fiscal 2014 they may exceed 2 percent in view of the effects of the tax hike, monetary accommodation, and the lagged impact of the yen’s depreciation. Attention should therefore be paid to whether short-term inflation expectations will turn out as expected.