Thus, upward pressure on wages and prices due to the tightening of supply and demand conditions is likely to steadily increase. Meanwhile, although medium- to long-term inflation expectations appear to be rising on the whole from a somewhat longer-term perspective, they have weakened recently.
The results of various surveys on inflation expectations as well as developments in break-even inflation (BEI) rates – calculated using the yields of inflation-indexed Japanese government bonds (JGBs) – imply that inflation expectations have been declining since end-2015. Nevertheless, when assessing developments in inflation expectations, it is necessary to also take account of firms’ price- and wage-setting stance and households’ spending behavior.