December 2, 2021
Bank of Japan
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Hyogo
SUZUKI Hitoshi
Member of the Policy Board
I. Recent Economic and Price Developments
A. Economic Developments
I would like to begin my speech by talking about overseas economies.
Overseas economies have recovered on the whole, albeit with variation across countries and
regions (Chart 1). Specifically, the United States and Europe, where vaccinations against the
novel coronavirus (COVID-19) moved ahead of other countries and regions, keep seeing
economic improvement as the resumption of economic activity continues to progress. The
Chinese economy is still recovering as a trend, although the pace of improvement has
decelerated, partly due to the resurgence of COVID-19 and power supply issues, for example,
exerting downward pressure on domestic demand and production. Regarding emerging and
commodity-exporting economies other than China, domestic demand and production in some
countries and regions were under downward pressure due to the spread of COVID-19 in
summer 2021, but these economies have picked up on the whole as the effects of the spread
have been waning recently.
Against this background, Japan's economy has picked up as a trend, although it remains in a
severe situation due to the impact of COVID-19 at home and abroad (Chart 2). Regarding the
impact at home, with the repeated resurgence of confirmed cases, the economy has been
pushed down significantly, mainly in the face-to-face services sector, including dining-out
and travel; however, with the number of cases having been at a low level since autumn, such
downward pressure seems to have started to wane somewhat. As for the impact abroad, the
spread of COVID-19 in the ASEAN countries in summer and the semiconductor shortage
have affected global supply chains. This has led to a temporary deceleration in exports and
production in Japan, mainly in the automobile-related sector. That said, a virtuous cycle from
corporate profits to business fixed investment continues to operate, supported by the recovery
in overseas economies and the effects of various policy measures. Thus, I am of the view that
the pick-up trend in Japan's economic activity as a whole is maintained. Let me elaborate on
this by component.
First, exports continue to increase as a trend on the back of the recovery in overseas
economies, despite being weak recently due to the effects of supply-side constraints seen in
some areas (Chart 3). By goods, exports of automobile-related goods have declined
significantly due to a drop in production that reflects supply-chain disruptions caused by the
spread of COVID-19 in the ASEAN countries. On the other hand, IT-related exports remain
on an uptrend, as exports of goods such as semiconductors for smartphones and data centers
have been solid, despite a decline in exports of some parts for automobiles. Exports of capital
goods also continue to increase, supported by a global rise in machinery investment and by
steady exports of semiconductor production equipment that reflect the expansion in demand
for digital-related goods. As for the outlook, exports are likely to remain affected by supply-
side constraints for the time being. Thereafter, however, they are expected to increase firmly
again on the back of firm expansion in global demand, particularly for digital-related goods.
Turning to private consumption, it has shown signs of a pick-up recently, although downward
pressure remains strong, particularly on services consumption, mainly due to vigilance
against COVID-19. The rate of change in consumption of households excluding imputed rent
for the July-September quarter of 2021 was negative on a quarter-on-quarter basis (Chart 2).
This was mainly attributable to (1) the continued downward pressure stemming from the
impact of COVID-19, exerted mainly on consumption of services, such as eating and drinking
as well as accommodations, (2) supply-side constraints, mainly on passenger cars and some
white goods, due to shortages such as of semiconductors, and (3) irregular weather. That said,
signs of a pick-up have been observed, mainly in face-to-face services consumption,
reflecting the lifting of the state of emergency and priority measures to prevent the spread of
disease, with the number of confirmed cases having been at a low level since October (Chart
4). With regard to the outlook, it is expected for the time being that private consumption will
be restrained mainly by vigilance against COVID-19 and that durable goods consumption
will be pushed down by supply-side constraints, such as on automobiles. However, private
consumption is expected to pick up again, supported by the materialization of pent-up demand
for services and durable goods, as public health protection and the resumption of consumption
activities coexist more effectively, due mainly to the widespread vaccinations, and as supply-
side constraints wane. Thereafter, as the impact of COVID-19 subsides gradually, an uptrend
in private consumption is projected to become evident, supported by improvement in
employee income.
As for business fixed investment, weakness has been seen in some industries; for example,
there has been a decrease in construction of stores and accommodation facilities by the eating
and drinking as well as accommodations industries and a downtrend in orders of "rolling
machines" (i.e., railway vehicles) and motor vehicles by the transportation industry. However,
business fixed investment as a whole has picked up with improvement in corporate profits.
Machinery investment has been supported mainly by digital-related goods, such as
semiconductor production equipment and items related to mobile phone base stations and 5G
networks, and by construction machinery. Regarding construction investment, construction
of logistics facilities has increased on the back of expansion in e-commerce and urban
redevelopment projects have made progress. The pick-up in business fixed investment can
also be observed in the plan for fiscal 2021 in the Bank of Japan's September 2021 Tankan
(Short-Term Economic Survey of Enterprises in Japan); business fixed investment is likely
to increase by 9.3 percent on a year-on-year basis, suggesting that -- as with the previous
survey in June -- the year-on-year rate of change in such investment for fiscal 2021 is likely
to clearly turn upward.1
The employment and income situation remains weak due to the impact of COVID-19. With
regard to the number of employed persons, the number of regular employees continues to
increase moderately -- mainly in the medical, healthcare, and welfare services industry as
well as the information and communications industry, both of which have faced a severe labor
shortage. On the other hand, that of non-regular employees remains at a relatively low level,
mainly in the face-to-face services industry. In addition, the unemployment rate and the active
job openings-to-applicants ratio have been more or less flat, albeit with fluctuations (Chart
5). As for wages, although the year-on-year rate of change has been positive in contrast to
2020, when a significant decline was observed, the level of wages has been somewhat lower
than that before the pandemic.
B. Price Developments
Let me now elaborate on price developments in Japan.
The year-on-year rate of change in the consumer price index (CPI) for all items less fresh
food, or the core CPI, has been at around 0 percent (Chart 6). That said, recent price
developments are largely attributable to temporary factors both in terms of positive and
negative changes. Specifically,
mobile phone charges -- for which low-cost plans have been
launched since spring 2021 -- have pushed down the overall rate of change in the CPI by
the CPI has been pushed up by (1) a rise in
more than 1 percentage point. On the other hand,
energy prices -- which were subdued in 2020 -- reflecting developments in crude oil prices
affected by (2)
a recovery in the global economy and the base effects of a discount on hotel
charges through the "Go To Travel" campaign in 2020, the government's program to promote
domestic tourism. When excluding these temporary factors, the year-on-year rate of change
in the CPI has been steady at around 0.5 percent. Meanwhile, medium- to long-term inflation
expectations, which represent the perception of firms and households regarding future prices,
have picked up (Chart 7).
C. Outlook for and Risks to Economic Activity and Prices
The outlook for Japan's economy is that, for the time being, there will likely remain (1)
downward pressure stemming from COVID-19 on services consumption
vigilance against
and (2) the effects of supply-side constraints on exports and production. Thereafter, however,
with the impact of COVID-19 waning gradually, mainly due to the widespread vaccinations,
the economy is likely to recover, supported by an increase in external demand,
accommodative financial conditions, and the government's economic measures. From the
middle of the projection period that covers through fiscal 2023, Japan's economy is projected
to continue growing, albeit slower, at a pace above its potential growth rate, as a virtuous
cycle from income to spending intensifies in the overall economy, including the household
sector. Given these factors, in the Bank's October 2021 Outlook for Economic Activity and
Prices (Outlook Report), the medians of the Policy Board members' forecasts for the year-
on-year growth rate of real GDP are 3.4 percent, 2.9 percent, and 1.3 percent for fiscal 2021,
2022, and 2023, respectively (Chart 8).
Turning to prices, the year-on-year rate of change in the core CPI is likely to increase
moderately in positive territory for the time being, reflecting a rise in energy prices. Thereafter,
albeit with fluctuations due to temporary factors, it is projected to increase gradually as a
trend, mainly on the back of improvement in the output gap and a rise in inflation expectations.
In the October Outlook Report, the medians of the Policy Board members' forecasts for the
year-on-year rate of change in the core CPI are 0.0 percent, 0.9 percent, and 1.0 percent for
fiscal 2021, 2022, and 2023, respectively (Chart 8).
Concerning risks to the outlook for economic activity and prices, the course of COVID-19
and its impact on domestic and overseas economies continue to warrant attention. In particular,
there are high uncertainties over how public health protection and the resumption of economic
activity will coexist. Specifically, if people's vigilance against COVID-19 entrenches due, for
example, to the spread of variants, there is a risk that economic activity, mainly for
consumption, will deviate downward from the baseline scenario. On the other hand, economic
activity could improve by more than expected because if, for example, public health is
protected and people's vigilance lessens significantly with the widespread vaccinations and
the rollout of antiviral medicines, pent-up demand for services consumption will materialize
relatively early. Attention also should be paid to a risk that the effects of supply-side
constraints seen in some areas will be amplified or prolonged. Specifically, mainly due to a
rapid economic recovery in advanced countries, such as the United States, and to the effects
of the resurgence of COVID-19 in Asia, supply-side constraints have been seen globally,
including the semiconductor shortage, the stagnation of logistics such as in marine transport,
and parts procurement difficulties reflecting supply-chain disruptions. As the impact of
COVID-19 wanes, demand imbalances and production and shipping bottlenecks are likely to
head toward a resolution. However, if the effects of supply-side constraints are prolonged or
amplified by more than expected, there is a risk that economic activity will deviate further
downward from the baseline scenario, particularly in the first half of the projection period.
II. Monetary Policy Responses to COVID-19 and Climate Change
Next, I would like to talk about the Bank's monetary policy actions regarding the two
important challenges that the world is facing: COVID-19 and climate change.
A. Responses in Light of the Impact of COVID-19
Let me first touch on policy responses in light of the impact of COVID-19.
In response to COVID-19, the Bank has been supporting financing, mainly of firms, and
maintaining stability in financial markets by conducting powerful monetary easing through
the following three measures since March 2020 (Chart 9): (1) the Special Program to Support
Financing in Response to the Novel Coronavirus (COVID-19); (2) an ample and flexible
provision of funds, mainly by purchasing Japanese government bonds (JGBs) and conducting
the U.S. dollar funds-supplying operations; and (3) purchases of exchange-traded funds
(ETFs) and Japan real estate investment trusts (J-REITs). These three measures have had
positive effects, coupled with the government's measures and private financial institutions
having actively fulfilled the functioning of financial intermediation. As a result, financial
conditions in Japan have been accommodative on the whole, although weakness in firms'
financial positions remains in some segments.
That said, developments in domestic and overseas economies continue to entail high
uncertainties due to the spread of COVID-19 variants, for example. It therefore continues to
be important to take measures in response to the pandemic for the time being. In this regard,
the Bank extended the duration of the Special Program until the end of March 2022. Under
this program, it will keep providing strong support for corporate financing. It will also
continue to closely monitor the impact of COVID-19 on economic activity and will not
hesitate to take additional easing measures if judged necessary.
B. Responses to Climate Change
Now, I will highlight responses to climate change.
Climate change is a global challenge and could have a broad impact on our society and
economic activity into the future. To address this challenge, all economic entities -- firms,
households, financial institutions, and governments -- need to actively play their roles over
the long term, and central banks are no exception. Specifically, since climate change could
exert an extremely large impact on developments in economic activity and prices as well as
financial conditions from a medium- to long-term perspective, central banks -- which have
the mission of achieving price stability and ensuring the stability of the financial system --
need to address this critical challenge. Against this background, central banks around the
world have taken necessary responses. The Bank of Japan released its strategy on climate
change in July 2021. This covers a wide range of areas including monetary policy, the
financial system, research, and international finance (Chart 10).
In June 2021, as a monetary policy response, the Bank announced its decision to introduce a
new fund-provisioning measure to support private financial institutions' various efforts in
fields related to climate change (Chart 11). It decided on and released the details of the
measure in September and will start the actual fund-provisioning in December. As such,
supporting the private sector's efforts on climate change will contribute to stabilizing the
macroeconomy in the long run. This is consistent with the monetary policy mission to achieve
price stability and thereby contribute to the sound development of the national economy.
On this basis, I would like to express my opinion on the importance of addressing climate
change for the future of Japan's economy while explaining how the new fund-provisioning
measure should be regarded.
While there is growing awareness of climate change on a global basis, some say that firms'
corporate values will increasingly be influenced by not only the digital transformation but
also the green transformation -- that is, initiatives to adapt to changes to industrial structures
and the socioeconomy with a view to restraining climate change caused by greenhouse gas
emissions and promoting economic growth. One example of a change to the environment
surrounding corporate activity is that carbon pricing, such as carbon taxes and emissions
trading, will likely be adopted widely across countries and regions, in addition to such
regulations as limiting greenhouse gas emissions. If the impact on climate change is explicitly
reflected in the cost of corporate activity through such initiatives, firms will become more
aware of such cost in making their decisions. Consequently, more firms -- mainly in
manufacturing -- will, for example, switch from using fossil fuels to electricity and shift their
business sites to locations where cheaper and more environmentally friendly electricity is
available.
I should note that thermal power generation using fossil fuels accounts for a large proportion
of the energy mix in Japan compared with in European countries and the United States, due
in part to the suspended operation of nuclear power plants following the Great East Japan
Earthquake in 2011. In addition, industrial power prices in Japan are at a high level relative
to those in other major countries. In particular, industrial power generated from renewable
resources is even more expensive. If this situation continues, Japanese firms -- many of which
have been advancing their global initiatives for "local production for local consumption" so
as to reduce foreign exchange risk and personnel expenses -- may accelerate the shifting of
their factories and other business sites abroad with a view to avoiding the high cost and
constraints on the availability of electricity.
To avoid this, Japanese firms must expand their R&D investment for the various technologies
needed to address climate change and fixed investment to utilize those technologies.
Specifically, it is necessary to (1) switch from using fossil fuels to electricity and carbon-free
alternative energy such as hydrogen, (2) raise the power-generating capacity of renewable
energy, and (3) proceed with carbon capture and reuse. To this end, joint efforts among
industry, academia, and the government are indispensable. In order to prevent Japan from
falling behind the rest of the world in the green transformation so that the hollowing out of
industries in the country does not accelerate, the government is expected to make further
efforts in terms of fiscal and institutional arrangements. At the same time, the Bank will firmly
support private financial institutions' various efforts in fields related to climate change
through its new fund-provisioning measure.
Meanwhile, on the financial front, giving consideration to market neutrality is important in
proceeding with the aforementioned initiatives. This is particularly true in Japan, where a
notable number of industries is supported by indirect financing. What is pivotal in such
financing is financial institutions' expertise in responding flexibly and appropriately to the
borrowers' funding needs through close communication. Given this, if the central bank
directly intervenes in micro-level resource allocation by, for example, implementing a policy
that supports environmentally sustainable "green" economic activities and restrains the
"brown" ones that are environmentally unfriendly, various distortions may occur in the
financial system. I believe that such a negative impact on the financial system can be avoided
with the Bank's new fund-provisioning measure, since it takes the approach of providing
funds to financial institutions for investment or loans they make to address climate change
based on their own decisions.
III. Achieving the Price Stability Target of 2 Percent
Next, I would like to discuss the Bank's monetary policy conduct that also looks ahead to the
post-COVID-19 era.
The Bank will persistently continue with powerful monetary easing based on Quantitative
and Qualitative Monetary Easing (QQE) with Yield Curve Control, of which the sustainability
and nimbleness were enhanced following the assessment conducted in March 2021. In doing
so, it will continue to aim at achieving the price stability target of 2 percent, as long as it is
necessary for maintaining that target in a stable manner (Chart 12).
However, it is likely that the inflation rate will increase gradually toward fiscal 2023, as I
mentioned earlier, but not reach the 2 percent target by then. It will take more time for prices
to rise because the mindset and behavior based on the assumption that prices will not increase
easily have been deeply entrenched among firms and households due to their experience of
deflation in the past.
Weak Private Consumption Due to Concern regarding the Future
In addition, people have been concerned over possibilities of future tax hikes and lower
pension payments. Also, their expectations for wage increases have not risen. I believe that
these factors have led to a situation where households' appetite for spending and their
tolerance of price rises have not been increasing.
In this regard, I would like to share my views on the relationship between fiscal policy and
economic activity. As the impact of COVID-19 has been exerting strong downward pressure
on economic activity, countries around the world, including Japan, have been conducting
large-scale fiscal spending. There is no doubt that such spending is indispensable to
preventing the economy from slowing down further and bringing it back onto a growth path.
At the same time, we must be aware that fiscal resources for such spending need to be secured
into the future. The United Kingdom, for example, has announced that it will raise the
corporate tax in 2023 for the first time in about 50 years to secure fiscal resources for taking
measures in response to COVID-19. In the case of Japan, the funding of reconstruction
following the Great East Japan Earthquake has been secured through a tax increase,
particularly on income tax. In the process of securing fiscal resources to respond to COVID-
19, economic activity could be significantly affected. Thus, forthcoming discussions on fiscal
soundness warrant close attention.
I would now like to talk about wages. Labor force participation of women and seniors has
increased due to the improved output gap and tightened labor market conditions under the
Bank's large-scale monetary easing and the government's nimble fiscal policy since 2013. As
a result, the number of employed persons, and in turn employee income, both increased up
until the COVID-19 outbreak. On the other hand, the average rate of increase in wages per
employee from 2013 to 2019 remained at 0.5 percent on a nominal basis and minus 0.5
percent on a real basis. Base pay has risen for eight consecutive years since 2014, and it is
encouraging that this remains the case even with the impact of COVID-19; however, the
negotiation results of firms for which base pay data are available for aggregation, as compiled
by the Japanese Trade Union Confederation (Rengo), have shown that the average increase
in base pay for the eight years is around 0.5 percent, remaining at a low level compared to
the 2 percent price stability target.
Path toward Wage Growth
In order to achieve wage increases under such circumstances, it is necessary for firms to
nimbly allocate their resources to promising business areas, and also for workers to receive
appropriate recurrent education and become able to flexibly move among divisions within the
firm or among different firms in seeking jobs with higher value added. On this point, attention
should be paid to the possibility of such reform of the economic structure being delayed due
to the impact of COVID-19. With economic activity being considerably pushed down, the
government and the Bank have taken aggressive policy responses to support sustaining firms'
businesses and employment. This has contained rises in the number of bankruptcies and the
unemployment rate. In this regard, Japan's economy has been heading toward recovery while
maintaining a certain continuity. On the other hand, I believe that these responses have
enabled the continuation of ineffective business areas that have existed since before the
pandemic.
Therefore, having experienced the pandemic, it has become more important to proceed with
the reform of Japan's economic structure by encouraging firms to make a shift to promising
business areas, as the global economy has been undergoing further acceleration toward
digitalization and decarbonization. Against this background, I expect that the Bank's
monetary policy measures to underpin economic activity will help to support firms' efforts to
allocate their funds and workers to areas with higher productivity by reallocating their internal
resources, such as through business restructuring, and by cooperating or integrating with other
firms. This will lead to an increase in corporate profits, and thus to wage increases. If
households start to expect steady increases in wages, their concern regarding the future will
ease and they will become encouraged to spend their income comfortably. As a result, they
will become more tolerant of price rises, and firms that are able to pass on cost increases to
prices more easily will deliver higher profitability, which in turn is expected to bring about
further wage increases.
Price Stability and Financial System Stability
Next, I will present my view regarding the future conduct of monetary policy.
The Bank has been pursuing powerful monetary easing for more than eight and a half years
since the introduction of QQE in 2013. Nonetheless, partly due to the impact of COVID-19,
it is unavoidable that this monetary easing will be prolonged further. To achieve the price
stability target of 2 percent, the Bank is expected -- even after COVID-19 subsides -- to
persistently continue with further effective and sustainable monetary easing, which reflects
the findings of the assessment in March 2021. For monetary easing measures to have a
sustained impact, maintaining the stability of the financial system is indispensable.
In this regard, Japan's financial system has been maintaining stability on the whole, while
COVID-19 continues to have a significant impact on economic and financial activity at home
and abroad. Nevertheless, it is necessary to continue to pay attention to the possibility that
credit costs will increase due to a delay in economic recovery at home and abroad. Also,
downward pressure on financial institutions' core profitability is likely to persist as a trend
even after COVID-19 subsides, reflecting the prolonged low interest rate environment and
structural factors such as the decrease in loan demand due to, for example, the declining
population. In this situation, attention should continue to be paid to the risk of a gradual
pullback in financial intermediation and to the possibility that the vulnerability of the
financial system will increase, mainly as a result of financial institutions' search for yield
behavior.
In March 2021, the Bank analyzed and assessed the impact of its monetary easing on
economic activity and prices, as well as on the functioning of financial intermediation and
market functioning. Based on the findings, it took policy actions to conduct further effective
and sustainable monetary easing. It will continue to deliberate on whether there is room for
more improvement in its conduct of monetary policy by carefully weighing the positive
effects and side effects of monetary easing, taking account of developments in economic
activity and prices as well as financial conditions at the time. In doing so, my view is that the
Bank should pay due attention to the fact that side effects of monetary easing will accumulate
over time. The Bank will continue to conduct monetary policy in an appropriate manner so
as to fulfill the two missions of achieving price stability and ensuring the stability of the
financial system.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Hyogo
December 2, 2021
SUZUKI Hitoshi
Bank of Japan
Chart 1
IMF World Economic Outlook
(as of October 2021)
real GDP growth rate, y/y % chg.
2021 2022
CY
2020
projection projection
World
-3.1 5.9 4.9
Advanced economies
-4.5 5.2 4.5
United States
-3.4 6.0 5.2
Euro area
-6.3 5.0 4.3
United Kingdom
-9.8 6.8 5.0
Japan
-4.6 2.4 3.2
Emerging market and
-2.1 6.4 5.1
developing economies
Emerging and developing Asia
-0.8 7.2 6.3
China
2.3 8.0 5.6
ASEAN-5
-3.4 2.9 5.8
Russia -3.0 4.7 2.9
Chart 2
Japan's Real GDP
s.a., q/q % chg.
2020 2021
Q3 Q4 Q1 Q2 Q3
Real GDP 5.4 2.8 -1.1 0.4 -0.8
[ann., q/q]
[23.5] [11.8] [-4.1] [1.5] [-3.0]
Private consumption
5.3 2.2 -1.3 0.9 -1.1
Consumption of households
6.5 2.7 -1.6 1.1 -1.4
(excluding imputed rent)
Private non-residential investment
-2.2 4.3 -1.0 2.2 -3.8
Private residential investment
-5.7 - 0.0 1.1 2.0 -2.6
Public demand
2.5 1.6 -1.6 0.4 0.6
Exports of goods & services
7.4 11.7 2.4 3.2 -2.1
Chart 3
Real Exports and Real Imports
s.a., CY 2015=100
120
Real exports
110
Real imports
100
90
80
70
60
CY 20 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Chart 4
Consumption Developments
Based on Credit Card Spending
change from baseline, %
30
20
10
0
-10
-20
Total
-30
Retail
Service
-40
-50
July Jan. July Jan. July
2019 2020 2021
Source: Nowcast Inc./ JCB, Co., Ltd., "JCB Consumption NOW."
JCB Consumption
Notes: 1. Figures are from the reference series in NOW, which takes changes in the number of consumers into account.
Chart 5
Labor Market Conditions
s.a., ratio s.a., %
1.8 6
1.6
5
1.4
1.2 4
1.0
3
0.8
0.6 2
0.4
Active job openings-to-applicants ratio for
full-time employees (left scale)
1
Active job openings-to-applicants
0.2
ratio (left scale)
Unemployment rate (right scale)
0.0 0
CY 2005 07 09 11 13 15 17 19 21
Chart 6
CPI (All Items Less Fresh Food)
y/y % chg.
2
1
0
Mobile phone charges
Effects of the "Go To Travel"
-1
campaign
Effects of the consumption tax hike and
free education policies
Energy
-2
Excluding the above factors
CPI (all items less fresh food)
-3
CY 20 16 17 18 19 20 21
Source: Ministry of Internal Affairs and Communications.
Notes: 1. Figures for energy consist of those for petroleum products, electricity, and manufactured and piped gas charges.
2. Figures for the "effects of the consumption tax hike and free education policies" from April 2020 onward are
Bank staff estimates and include the effects of measures such as free higher education introduced in April 2020.
Chart 7
Inflation Expectations
y/y, ann. avg., %
2.5
Households (over the next 5 years)
2.0
Firms (5 years ahead)
1.5
1.0
0.5
0.0
CY 20 05 07 09 11 13 15 17 19 21
Source: Bank of Japan.
Notes: 1. Figures for households are from the Opinion Survey on the General Public's Views and Behavior,
estimated using the modified Carlson-Parkin method.
2. Figures for firms are those for general prices in the Average of Enterprises' Inflation Outlook for all industries and
enterprises in the Tankan.
Chart 8
Outlook for Economic Activity and Prices as of October 2021
Forecasts of the Majority of Policy Board Members
y/y % chg.
Real GDP CPI (all items less fresh food)
+3.0 to +3.6 0.0 to +0.2
Fiscal 2021
[+3.4] [0.0]
Forecasts made in
+3.5 to +4.0 +0.3 to +0.6
July 2021
+2.7 to +3.0 +0.8 to +1.0
Fiscal 2022
[+2.9] [+0.9]
Forecasts made in
+2.6 to +2.9 +0.8 to +1.0
July 2021
+1.2 to +1.4 +0.9 to +1.2
Fiscal 2023
[+1.3] [+1.0]
Forecasts made in
+1.2 to +1.4 +0.9 to +1.1
July 2021
Source: Bank of Japan, "October 2021 Outlook for Economic Activity and Prices."
Notes: 1. Figures in brackets indicate the medians of the Policy Board members' forecasts (point estimates).
2. The forecasts of the majority of the Policy Board members are constructed as follows: each Policy Board member's forecast takes the form of a point estimate --
namely, the figure to which they attach the highest probability of realization. These forecasts are then shown as a range, with the highest figure and the lowest
figure excluded. The range does not indicate the forecast errors.
3. The reduction in mobile phone charges by major carriers conducted in spring 2021 is estimated to directly push down the CPI for fiscal 2021 by around 1.1
percentage points.
4. In August 2021, the base year of the CPI was changed from 2015 to 2020, and figures for the year-on-year rate of change from January 2021 onward were
retroactively revised. Accordingly, the year-on-year rate of change in the CPI for all items excluding fresh food for the April-June quarter of 2021 was revised
downward by around 0.7 percentage points; namely, from around 0.1