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Inflation Expectations Curve in Japan


April 9, 2019
Toshitaka Maruyama*1
Kenji Suganuma*2


In this paper, we estimate "inflation expectations curve" - a term structure of inflation expectations - combining forecast data of various agents. We use a state-space model which considers consistency among expectations at different horizons, and for relationships between inflation rate, real growth rate and nominal interest rate. We find that the slope of the curve in Japan is positive in almost all periods since the 1990s. In addition, looking at the estimated inflation expectations in time series, the inflation expectations at all horizons rose in the mid-2000s and from late 2012 to 2013, after the downward trend from the early 1990s to the early 2000s. Short-term inflation expectations in particular have tended to shift upwards since the launch of Quantitative and Qualitative Monetary Easing, while being affected by fluctuations in the import price. Finally, a structural VAR analysis shows that the estimated inflation expectations in Japan are largely adaptive, meaning their formation is affected by actual inflation rates.

Inflation expectations; Term structure; State-space model

JEL classifications
C32; D84; E31; E43; E52

The authors are grateful to Hibiki Ichiue, Wataru Hirata, Tomiyuki Kitamura, Takushi Kurozumi, Teppei Nagano, Kenji Nishizaki, Mototsugu Shintani, Shigenori Shiratsuka, Tomohiro Sugo, Toshiaki Watanabe and seminar participants at the Bank of Japan for helpful comments and discussions. 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
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  2. *2Monetary Affairs Department, Bank of Japan
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