J u n e 6 , 2 0 2 2
Bank of Japan
The Bank's Thinking on Monetary Policy:
Toward Achieving the Price Stability Target in a
Sustainable and Stable Manner
Speech at the Kisaragi-kai Meeting in Tokyo
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
It is my great pleasure to have the opportunity today to speak at the Kisaragi-kai meeting.
The last time I was invited to this meeting was in March 2021. This was just after the Bank
of Japan conducted the Assessment for Further Effective and Sustainable Monetary Easing
to enhance the sustainability and nimbleness of monetary easing amid concern over the
lingering impact of the novel coronavirus (COVID-19). With the global resumption of
economic activity since then and Russia's invasion of Ukraine, price developments at home
and abroad have changed significantly. In particular, inflation in Europe and the United
States has accelerated at a much faster pace than many experts had expected, and the
Federal Reserve and other central banks have been moving ahead with reducing monetary
accommodation in earnest recently. Despite being lower than the respective indexes for
Europe and the United States, Japan's consumer price index (CPI) for this April exceeded 2
percent on a year-on-year basis for the first time since summer 2008. Even in this situation,
unlike central banks in Europe and the United States, the Bank has made clear its stance to
persistently continue with aggressive monetary easing.
Today, I will talk about why the Bank considers it necessary to maintain monetary easing in
Japan while making comparisons with the situation in Europe and the United States. In
addition, as the Bank aims at achieving the price stability target of 2 percent in a sustainable
and stable manner, I would like to explain my view on the path toward the achievement.
I. The Bank's Monetary Policy Conduct for the Time Being
A. Basic Thinking on the Conduct of Monetary Policy given Developments in
Economic Activity and Prices
Let me start by talking about the basic thinking on the conduct of monetary policy for the
time being. There are mainly three reasons why the Bank considers it necessary to
persistently continue with aggressive monetary easing.
The first is that Japan's economy is still on its way to recovery from the downturn caused by
COVID-19. Unlike in the United States and the euro area, Japan's real GDP has not yet
recovered to the pre-pandemic level (Chart 1). The real GDP growth rate for the
January-March quarter of 2022 was negative, at minus 1.0 percent on an annualized
quarter-on-quarter basis. This is because, amid prolonged supply-side constraints, such as
on semiconductors and parts and components, services consumption had been under
increased downward pressure due to the spread of the Omicron variant. Real GDP for the
January-March quarter exceeded the pre-pandemic level (or the 2019 level) by 3.7 percent
for the United States and by 0.6 percent for the euro area, whereas real GDP for Japan
remained 2.7 percent below the pre-pandemic level. By demand component, in Japan, the
recovery in domestic private demand, such as private consumption and business fixed
investment, has been somewhat weaker than in the United States and the euro area. Given
this situation in Japan, the most important role of monetary policy is to maintain
accommodative financial conditions and thereby firmly support a full-fledged recovery in
domestic private demand.
The second reason is that, since Japan is a commodity importer, the economy has been
under downward pressure from an outflow of income brought about by recent rises in
international commodity prices (Chart 2). In contrast, the United States produces most of its
resources, partly as a result of the shale revolution, and thus a rise in commodity prices does
not necessarily lead directly to an outflow of income from the country. An indicator of
national income that also takes into account changes in the terms of trade is called real gross
national income (GNI). This is calculated by adding up real GDP, net income from the rest
of the world -- such as foreign investment income -- and trading gains and losses, which
represent the change in income due to changes in the terms of trade that are mainly brought
about by movements in commodity prices. While Japan's real GDP growth rate for fiscal
2021 was 2.1 percent, reflecting an increase in spending due to the resumption of economic
activity, the growth rate in terms of real GNI was only 0.6 percent due to deterioration in the
terms of trade stemming from rising commodity prices. It should be noted that the main
cause of the recent deterioration in Japan's terms of trade is a rise in commodity prices in
U.S. dollar terms, which boosts only import prices, and not the depreciation of the yen,
which increases both export and import prices in yen terms and therefore is generally
neutral to the terms of trade. In any event, since Japan's economy has been under downward
pressure from the income side due to rising commodity prices, it is necessary to mitigate
this negative impact by continuing to conduct monetary easing.
The third reason is that the price stability target of 2 percent needs to be achieved in a
sustainable and stable manner. As was generally expected, the year-on-year rate of change
in Japan's CPI for all items excluding fresh food was 2.1 percent for April, reaching 2
percent on the surface (Chart 3). The main cause of the increase was a significant rise in
energy prices, with much of the impact of last year's reduction in mobile phone charges
dissipating. That said, the rate of change in the CPI for all items excluding fresh food and
energy was only 0.8 percent, suggesting that price rises are not necessarily evident for a
wide range of items, with the exception of energy. The Bank projects that the rate of
increase in the CPI for all items excluding fresh food will be 1.9 percent for fiscal 2022 but
will decelerate to 1.1 percent for fiscal 2023, when the positive contribution of the rise in
energy prices to the CPI is likely to dissipate. Achieving the price stability target of 2
percent does not mean CPI inflation reaching 2 percent temporarily due to such factors as a
rise in energy prices, but rather a situation where the inflation rate is 2 percent on average
over the business cycle. To realize this situation, it is necessary that the Bank continue with
the current aggressive monetary easing and thereby encourage the formation of a virtuous
cycle in which underlying inflation rises moderately amid increases in corporate profits,
employment, and wages. I will explain in detail later about the importance of wage
increases toward achieving the price stability target of 2 percent.
B. Monetary Easing under Yield Curve Control
Due to the three reasons I just outlined, the Bank has pursued aggressive monetary easing.
As a specific measure, the Bank sets a clear target level for 10-year Japanese government
bond (JGB) yields, in addition to the short-term policy interest rate, under the framework of
yield curve control. At the latest Monetary Policy Meeting (MPM) in April, the Bank
decided to maintain the guideline for market operations, in which the short-term policy
interest rate is set at minus 0.1 percent and the target level of 10-year JGB yields is around
zero percent. In addition, given the findings of the assessment conducted in March 2021, the
Bank, with a view to maintaining market functioning at a certain level and controlling the
level of yields without impairing the effects of monetary easing, made clear that an
appropriate range of 10-year JGB yield fluctuations would be between around plus and
minus 0.25 percent. Based on this guideline, the Bank currently purchases a necessary
amount of JGBs so that 10-year JGB yields will stay within the range of plus and minus
0.25 percent from zero percent.
At the April MPM, the Bank also decided to offer to purchase 10-year JGBs at 0.25 percent
every business day in principle through fixed-rate purchase operations, with a view to
firmly setting an upper limit on the range of 10-year JGB yield fluctuations and to making
clear the Bank's monetary easing stance. This decision was based on the thinking that, while
some market participants attempted to predict the future course of the Bank's policy stance
drawing on whether or not fixed-rate purchase operations were conducted, the Bank's
announcement in advance that it would conduct these operations essentially every business
day would ensure market stability.
In fact, since the turn of the year, even though long-term interest rates in Europe and the
United States have continued on an uptrend, 10-year JGB yields have been at levels
consistent with the guideline for market operations, without exceeding the upper limit of
0.25 percent (Chart 4). Under yield curve control, the Bank sets a target level for 10-year
JGB yields, and thus the amount of JGB purchases is determined endogenously. Recently,
the Bank has been conducting fixed-rate purchase operations and has increased the amount
of JGBs it purchases. However, the total amount purchased is not significantly higher than
in the past, and there continue to be no bids submitted for fixed-rate purchase operations
since May, which is after the Bank decided to conduct the operations every business day.
While I think this is due in part to the "stock effect" attributable to the past JGB purchases,
another reason seems to be that the "announcement effect," or the effect of the Bank having
announced that it will purchase an unlimited amount of JGBs through fixed-rate purchase
operations if 10-year JGB yields exceed 0.25 percent, has had a significant influence on the
formation of market participants' expectations. At any rate, 10-year JGB yields have been
stable at low levels under yield curve control, and I consider that this has sustained
accommodative funding conditions, such as for CP, corporate bonds, and bank lending, and
in turn firmly supported Japan's economic activity.
II. Toward Achieving the Price Stability Target of 2 Percent in a Sustainable and
Stable Manner
I will now talk about the specific path toward achieving the price stability target of 2
percent in a sustainable and stable manner. Discussions from a workshop on "Issues
Surrounding Price Developments during the COVID-19 Pandemic" that the Bank held at
the end of March will be informative in this regard.1 The workshop involved leading
Japanese academic economists and generated lively discussions on why Japan alone
continues to have low inflation, based on the analyses by the Bank's staff regarding the
differences in price developments between Japan, the United States, and Europe that came
to light during the pandemic. Taking these discussions into account, I believe that the issue
of whether wages will clearly increase and service prices will overcome long-standing zero
inflation holds the key to achieving the price stability target of 2 percent in Japan in a
sustainable and stable manner. Let me explain this in more detail.
A. Inflation Dynamics during the Pandemic: Japan, the United States, and Europe
I will first outline inflation dynamics in Japan, the United States, and Europe during the
pandemic (Chart 3). The rise in inflation has been particularly notable in the United States,
where the rate of change in the CPI has recently been over 8 percent and that in the CPI
excluding energy has been over 6 percent. In terms of monetary policy responses, the
Federal Reserve had taken the stance until last summer that, since inflation was expected to
be transitory, it would allow inflation to overshoot and focus on supporting the economy by
maintaining an accommodative stance of monetary policy, unless the second-round effects
1
For details, see Amamiya, M., "The COVID-19 Crisis and Inflation Dynamics," opening remarks
at the workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic,"
March 29, 2022, https://www.boj.or.jp/en/announcements/press/koen_2022/ko220329b.htm/; and
Monetary Affairs Department, Bank of Japan, "Characteristics of Price Developments in Japan:
Summary of the First Workshop on 'Issues Surrounding Price Developments during the COVID-19
Pandemic,'" BOJ Reports and Research Papers, May 2022,
https://www.boj.or.jp/en/research/brp/ron_2022/ron220523a.htm/.
of inflation were observed on wages or inflation expectations.2 In fact, inflation at that time
was mainly driven by cost-push factors, such as rises in energy prices and prices of
automobiles, which were strongly affected by supply-side constraints. However, contrary to
initial expectations, the inflation rate in the United States since then has accelerated
significantly. There are two reasons for this. First, the labor force participation rate has not
recovered sufficiently, mainly due to vigilance against COVID-19. Second, while economic
growth continues to be robust, prices overall have been pushed up by strong aggregate
demand in addition to supply factors. In this situation, labor market conditions have been
tightening, as seen in the ratio of job openings to total separations recording a historical
high of around 2 recently. Given the rise in inflation, workers have been requesting higher
wages, and this has led to a further rise in services prices, including housing rent. Therefore,
in order to contain wages and prices from spiraling upward, the Federal Reserve raised its
policy interest rate by 0.25 percentage points in March and 0.5 percentage points in May,
and it has been communicating that ongoing increases in the rate will be necessary.
Basically, these monetary responses by the Federal Reserve are expected to also contribute
to stability in the global economy through steady developments in U.S. economic activity
and prices. However, amid concern in global financial and capital markets over elevated
inflation and acceleration in the pace of policy interest rate hikes in the United States, some
have pointed out risks posed, for example, by significant adjustments in risk asset prices,
such as stocks, and capital outflows from emerging economies. It is necessary to pay close
attention to how these risks will evolve.
In the euro area, the rate of change in consumer prices has also seen a significant increase
lately. The headline inflation rate has exceeded 8 percent and the rate excluding energy has
been above 4 percent. Since the area has strong economic and geographic relations with
Ukraine, energy prices have risen further while uncertainties over the economic outlook
have intensified. The European Central Bank (ECB) faces a difficult dilemma of curbing
inflation or supporting the economy. Although the ECB has focused so far on supporting the
economy and put off raising interest rates, ECB President Lagarde has signaled that interest
rates will be raised by the end of the July-September quarter as the second-round effects of
inflation have started to be seen on wages and inflation expectations recently.
In contrast, Japan's CPI, despite having increased, has been only around 2 percent of late
and has been lower than the respective indexes for Europe and the United States. This
seems to once again highlight Japan's long-standing issue of prices being unlikely to rise.
That is, goods prices in Japan have shown cyclical fluctuations along with the output gap, as
is the case in Europe and the United States, although to a varying degree. However, services
prices have remained extremely rigid, unlike in Europe and the United States, and have
barely risen during the pandemic.
In order for Japan to achieve inflation of around 2 percent every year, services prices will
need to constantly make a roughly 2 percent contribution to the CPI and goods prices will
need to see cyclical fluctuations at around 2 percent. On this point, comparing the
distribution of price changes of items that make up the CPI in Japan and the United States,
the distribution in the United States before the pandemic shows some variation at around 2
percent, primarily for services (Chart 5). In Japan, meanwhile, price changes for an
overwhelmingly large number of items hover at around 0 percent, and there has been no
major change to this during the pandemic.
The primary reason for being unable to achieve the price stability target of 2 percent,
despite the fact that the Bank has carried out large-scale monetary easing for over nine years,
is that this "zero percent anchoring" of inflation expectations -- in other words,
"zero-inflation norm" -- has been extremely persistent. Not all economic entities in the
United States share the 2 percent norm; for some the norm is 1 percent, while for others it is
3 percent. The 2 percent figure is simply the average. However, the zero inflation norm in
Japan means that everyone is acting essentially in concert to keep prices unchanged.
Economists have pointed to a "kinked demand curve" as a reason for unchanging prices in
Japan (Chart 6).3 In other words, in the demand curve faced by individual firms, although
demand declines significantly with even slight price hikes, small price cuts do not result in
that much increase in demand. This is why keeping prices unchanged has been the optimal
price-setting behavior for Japanese firms.
B. Importance of Wage Increases
The key to changing this situation is higher wages. That is, it is important to increase labor
costs, which are faced by all firms, thereby creating a situation where firms raise selling
prices, including services prices, every year, and to heighten consumers' tolerance of price
rises through higher wage income. To this end, the following factors are essential. The first
is that aggressive monetary easing is maintained and tight labor market conditions are in
turn sustained for a long period. The second is that actual inflation is reflected in wage
increases resulting from the annual spring labor-management wage negotiations.
Let me start by looking at the first factor: sustaining tight labor market conditions. As the
Bank has pursued aggressive monetary easing since 2013, economic activity in Japan has
been pushed up and labor market conditions have continued to tighten. Around 2018, before
the outbreak of COVID-19, the active job openings-to-applicants ratio rose to 1.6,
surpassing the peak during the bubble period, while the unemployment rate declined to the
range of 2.0-2.5 percent (Chart 7). Under these circumstances, upward pressure on wages
has increased in external labor markets -- where firms adjust excess marginal labor force, or
a shortage of it -- as seen in the fact that hourly wages for part-time employees, which are
sensitive to labor market conditions, rose by around 3 percent. It was expected that the
tightening of external labor market conditions would feed through to internal labor markets,
which mainly consist of full-time employees working within firms. This is because, as
3
For the relationship between the kinked demand curve and low inflation in Japan, see Aoki, K.,
Ichiue, H., and Okuda, T., "Consumers' Price Beliefs, Central Bank Communication, and Inflation
Dynamics," Bank of Japan Working Paper Series, no. 19-E-14, September 2019,
https://www.boj.or.jp/en/research/wps_rev/wps_2019/data/wp19e14.pdf; and Watanabe, T., Bukka to
wa nani ka (Tokyo: Kodansha, 2022). Negishi Takashi, professor emeritus at the University of
Tokyo, carried out pioneering work on the kinked demand curve from the perspective of the
microeconomic foundations of macroeconomics. For details, see Negishi, T., Microeconomic
Foundations of Keynesian Macroeconomics (Amsterdam: North-Holland, 1979).
long-term employment practices of full-time employees basically have been maintained in
Japan's internal labor markets, the labor market slack is likely to remain and wage increases
tend to be constrained even during economic booms as a result of securing employment
during recessions. However, as the slowdown in overseas economies has become clear since
the end of 2018 and Japan's economy was directly hit by the COVID-19 outbreak after the
turn of 2020, labor market conditions started to ease as a trend and wages of full-time
Outlook for
employees did not see a full-fledged increase. As presented in the April 2022
Economic Activity and Prices
(Outlook Report), economic growth is expected to outpace
the potential growth rate for three consecutive years from fiscal 2022. In this situation, the
key is whether labor market conditions will tighten not only in external labor markets but
also in internal labor markets, and whether this will lead to a full-fledged rise in wages.
I will now turn to the second factor: achieving wage increases that reflect actual inflation.
During Japan's deflationary period, as well as the period of economic recovery in the
mid-2000s, many firms put off making base pay increases. Such increases have resumed
since 2013, amid a moderate rise in inflation on the back of large-scale monetary easing,
and base pay has increased for nine consecutive years, including this fiscal year.
Nevertheless, the average increase over this period has been around 0.5 percent, which is
still lower compared with Europe and the United States, or Japan before the deflationary
period. Several factors are thought to lie behind the low growth in base pay. One hypothesis
raised during the workshop held at the end of March was that, since inflation in recent years
has been well below the average increase in regular salaries of around 2 percent, individual
households did not recognize inflation as an increase in living expenses and were thus less
likely to pay attention to prices. In economics, this recently has been referred to as "rational
inattention," meaning that people are likely to be inattentive to information judged to be of
little importance when making economic decisions. Of course, the validity of this
hypothesis needs to be further verified theoretically and empirically. What warrants
attention is the extent to which firms will take into account the recent inflation of nearly 2
percent in their wage increases from fiscal 2023 onward.
C. Signs of Changes in Inflation Expectations
In this regard, changes have recently started to be seen in both firms' and households'
perceptions of inflation and inflation expectations in Japan. In terms of firms' perceptions of
Tankan
inflation, the March (Short-Term Economic Survey of Enterprises in Japan) shows
that the diffusion index for output prices -- which is considered to indicate firms'
price-setting stance for around three to six months ahead -- has risen to its highest level
since early in 1980 (i.e., just after the second oil shock) for the manufacturing industry and
since early in 1990 (i.e., at the end of the bubble period) for the nonmanufacturing industry
Tankan
(Chart 8). The also shows that firms' inflation outlook for general prices has risen
clearly for one year ahead, reaching its highest level since the start of the survey, while the
outlooks for three years ahead and five years ahead also have increased to near peak levels.
As firms adopt an increasingly active price-setting stance, Japanese households' tolerance of
price rises has been increasing. This can be regarded as an important change from the
perspective of aiming to achieve sustained inflation. On this point, Watanabe Tsutomu,
professor at the University of Tokyo, is conducting an interesting survey (Chart 9). He
regularly surveys households in five countries including Japan and collects their answers to
the question of what they will do when the price of a product that they always buy goes up
by 10 percent at the supermarkets that they frequent. In the previous survey conducted last
August, more than half of Japanese households answered that they would deal with the
price increase by switching to a different supermarket. This is precisely what the kinked
demand curve would predict. The results for Japan were markedly different from those for
Europe and the United States, where more than half of the respondents answered that they
would accept the 10 percent price increase in the product that they always buy and continue
to buy the same amount of it at the same supermarket. The latest survey conducted this
April, however, reveals changes in the results for Japan: the number of Japanese
respondents who said they would deal with the price increase by switching to a different
supermarket was down significantly, and more than half, as in Europe and the United States,
answered that they would accept the price increase and continue to buy the same amount at
the same supermarket.
While the results should be interpreted with considerable latitude, one hypothesis drawn
from them is that "forced savings" accumulated as a result of restrictions during the
pandemic may have led to improvement in households' tolerance of price rises. At any rate,
the point to consider for the time being is how Japan, while households are acceptant of
price rises due to factors such as forced savings, can maintain a favorable macroeconomic
environment to the extent possible and make this lead to a full-fledged rise in wages,
including base pay, from fiscal 2023 onward.
Conclusion
Today, I have talked about why the Bank considers monetary easing to be necessary in
Japan at present and about the importance of wage increases in order to achieve the price
stability target of 2 percent in a sustainable and stable manner.
Japan's economy is still on its way to recovery from the pandemic and has been under
downward pressure from the income side due to rising commodity prices. In this situation,
monetary tightening is not at all a suitable measure. The top priority for the Bank is to
persistently continue with the current aggressive monetary easing centered on yield curve
control and thereby firmly support economic activity. Unlike other central banks, the Bank
has not faced the trade-off between economic stability and price stability. For this reason, it
is certainly possible for the Bank to continue stimulating aggregate demand from the
financial side.
In order to provide a quantitative and easy-to-understand explanation of its projections for
underlying inflation, the Bank included its forecasts for the CPI excluding fresh food and
energy in the April 2022 Outlook Report. The forecasts show that the year-on-year rate of
change in the CPI excluding both categories should increase in positive territory to around
1.5 percent for fiscal 2024, on the back of improvement in the output gap and a rise in
inflation expectations. For prices to rise as projected and further toward 2 percent in a stable
manner, it is necessary to create a virtuous cycle that generates synergy between wage
increases and price rises, as I have explained today.
I would like to close by noting that the Bank will take a strong stance on continuing with
monetary easing, in that it will provide a macroeconomic environment where wages are
likely to increase so that the rise in inflation expectations and changes in the tolerance of
price rises -- which have started to be seen recently -- will lead to sustained inflation.
Thank you very much for your attention.
The Bank's Thinking on Monetary Policy:
Toward Achieving the Price Stability Target
in a Sustainable and Stable Manner
Speech at the Kisaragi-kai Meeting in Tokyo
June 6, 2022
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
I. The Bank's Monetary Policy Conduct for the Time Being
II. Toward Achieving the Price Stability Target of 2 Percent
in a Sustainable and Stable Manner
Conclusion
Real GDP in Japan, the United States, and the Euro Area
Japan United States Euro Area
s.a., % points
s.a., % points
s.a., % points
5
5 5
0
0 0
22/Q1
22/Q1
-5 +3.7
-5 -5
+0.6
22/Q1
Change from
Change from
-2.7 CY 2019 average
CY 2019 average
Change from
-10
-10 -10
CY 2019 average
-15
Other -15
-15
Goods exports
Business fixed investment
-20
-20
-20
Private consumption
Real GDP
-25
-25
-25
18 19 20 21 22
CY CY 18 19 20 21 22 CY 18 19 20 21 22
Note: The charts show the deviation from the 2019 average. Figures for business fixed investment for the euro area are those for gross fixed capital formation excluding housing investment.
Sources: Cabinet Office; Haver.
1
Chart 2
I. The Bank's Monetary Policy Conduct for the Time Being
Import Prices, Export Prices, and Real GNI
Import Price Index Real GNI
y/y % chg.
60 y/y % chg.
Exchange rate effects
6
Trading gains/losses
Contract currency basis
40
Yen basis Income from/to the rest of the world
Real GDP
20
4 Real GNI
0
-20
2
-40
CY 09 10 11 12 13 14 15 16 17 18 19 20 21 22
0
Export Price Index
y/y % chg.
60
Exchange rate effects
-2
Contract currency basis
40
Yen basis
20
-4
0
-20
-6
-40
FY 95 97 99 01 03 05 07 09 11 13 15 17 19 21
CY 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Consumer Prices in Japan, the United States, and the Euro Area
Japan United States Euro Area
y/y % chg.
y/y % chg. y/y % chg.
9 9 9
April: +8.3%
May: +8.1%
8 8 8
Energy <11%>
Energy <7%> Energy <7%>
7 7 7
Services <50%> Services <63%>
Services <42%>
6
6 Goods excluding automobiles 6
Goods <40%>
<21%>
Goods <47%>
5 Temporary factors 5 Automobiles <9%> 5
4 CPI (less fresh food) <100%> CPI <100%> 4 HICP <100%>
4
3 3 3
April: +2.1%
2 2
2
1 1 1
0 0
0
-1 -1 -1
-2 -2
-2
-3 -3 -3
CY
16 17 18 19 20 21 22 16 17 18 19 20 21 22 CY 16 17 18 19 20 21 22
CY
Notes: 1. Figures for services include administered prices.
2. Figures for temporary factors for Japan are staff estimates and consist of mobile phone charges and the effects of the consumption tax hike, policies concerning the provision of
free education, and the "Go To Travel" campaign, which covers a portion of domestic travel expenses.
3. Figures in angular brackets show the share of each component. Figures for temporary factors for Japan include mobile phone charges (weight: 3%).
4. Figures for 2022/Q2 for Japan and the United States are for April, while those for the euro area are April-May averages.
Sources: Ministry of Internal Affairs and Communications; Haver. 3
Chart 4
I. The Bank's Monetary Policy Conduct for the Time Being
Long-Term Government Bond Yields
and the Bank's JGB Holdings
Long-Term Government Bond Yields The Bank's JGB Holdings
tril. yen
% tril. yen
600 90
4
Japan
Introduction of Introduction of
Outbreak of
QQE YCC
United States
COVID-19
80
Germany
500
3
70
400 60
2
50
300
40
1
200 30
20
0 Amount outstanding
100
(left scale)
10
Change from previous
year (right scale)
-1 0 0
CY 12 13 14 15 16 17 18 19 20 21 22 CY 12 13 14 15 16 17 18 19 20 21 22
Chart 5
II. Toward Achieving the Price Stability Target of 2 Percent in a Sustainable and Stable Manner
Price Change Distributions in Japan and the United States
Japan (Pre-Pandemic) United States (Pre-Pandemic)
share of the weight of items, %
share of the weight of items, %
60
60
50
50
September 2019
Goods
September 2019
Services
40
40
Energy
30 30
20 20
10 10
0
0
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
or more or more
or less or less
y/y % chg. y/y % chg.
Japan (Latest) United States (Latest)
share of the weight of items, % share of the weight of items, %
60
60
50
50
April 2022
April 2022
40
40
30 30
Mobile phone
Electricity charges,
charges, etc.
20 20
gas charges, gasoline,
10 etc. 10
0
0
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
or more
or less or less
or more
y/y % chg.
y/y % chg.
Note: Figures for the United States are for the CPI for all items. Those for Japan are for the CPI for all items excluding fresh food.
Sources: Ministry of Internal Affairs and Communications; BLS.
5
Chart 6
II. Toward Achieving the Price Stability Target of 2 Percent in a Sustainable and Stable Manner
Illustration of a Kinked Demand Curve
Relative
price
Traditional demand curve
Kinked demand curve
Demand and price
at the moment
Demand
Chart 7
II. Toward Achieving the Price Stability Target of 2 Percent in a Sustainable and Stable Manner
Labor Market Conditions
Active Job Openings-to-Applicants Ratio Unemployment Rate
Introduction
Introduction Outbreak of
Outbreak of
of QQE of QQE COVID-19
s.a., ratio COVID-19
s.a., %
1.8
6
1.6
5
1.4
1.2
4
1.0
0.8
3
0.6
0.4
Active job openings-to-applicants
2
ratio (total)
0.2
Active job openings-to-applicants
ratio (full-time employees)
0.0 1
80 84 88 92 96 00 04 08 12 16 20
CY 80 84 88 92 96 00 04 08 12 16 20 CY
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications.
7
Chart 8
II. Toward Achieving the Price Stability Target of 2 Percent in a Sustainable and Stable Manner
Firms' Output Prices and Inflation Expectations
Output Prices (Tankan) Inflation Expectations (Tankan)
y/y % chg.
DI