First, improvement in the output gap, as seen in the tightening of labor market conditions, will lead to an increase in the inflation rate mainly through wage increases. Second, energy prices will start to push up the CPI, while the downward pressure of the past yen appreciation will gradually abate.
Third, these developments, with the Bank's strong commitment to achieving the price stability target of 2 percent, will lead to higher medium- to long-term inflation expectations among the public. Let me elaborate on these factors. The tightening of labor market conditions is exerting upward pressure on wages.