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The Anchoring of Inflation Expectations in Japan : A Learning-Approach Perspective

April 6, 2018
Yoshihiko Hogen*1
Ryoichi Okuma*2


This paper employs a model of learning about long-term inflation to jointly estimate long-term inflation expectations and the degree to which they have been anchored to the 2 percent inflation mark over the last half century in Japan. The estimated model shows that long-term inflation expectations declined to about 2 percent in the late 1980s and remained anchored to the 2 percent mark until the mid-1990s. They fell below 2 percent in the late 1990s, which resulted in a low degree of anchoring until the early 2010s. Following the introduction of the price stability target of 2 percent and the launch of Qualitative and Quantitative Monetary Easing in early 2013, inflation expectations rose until early 2015, but have not yet been anchored to the target. A further VAR analysis demonstrates that markups in domestic goods and services markets are one important reason why expectations have not been anchored at 2 percent since the late 1990s.

Inflation expectations; Anchoring; Learning

JEL classifications
D83; D84; E31; E58

The authors would like to thank Kosuke Aoki, Hibiki Ichiue, Takushi Kurozumi, Ichiro Muto, Takashi Nagahata, Teppei Nagano, Kenji Nishizaki, Mototsugu Shintani, Shigenori Shiratsuka, Nao Sudo, Tomohiro Tsuruga, Toshinao Yoshiba, and seminar participants at the Bank of Japan for helpful comments and discussions. The authors would also like to thank Rie Yamaoka for resourceful research assistance. Any remaining errors are the sole responsibility of the authors. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan.

  1. *1Monetary Affairs Department, Bank of Japan
  2. *2Monetary Affairs Department, Bank of Japan


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