The year-on-year rate of change in the consumer price index (CPI) and short-term inflation expectations (i.e., one year ahead) were also around 2 percent until the early 1990s. From around 1992, after the collapse of the asset bubble, however, the rate of change in the CPI began to drop, turning negative from around 1999.
The first half of this period coincided with a declining trend in real GDP growth rates. Since these rates were mostly lower than potential GDP growth rates, which had been on a declining trend, the output gap deteriorated significantly, generating downward pressure on actual prices (Chart 4).