M a y 2 9 , 2 0 2 4
Bank of Japan
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kumamoto
ADACHI Seiji
Member of the Policy Board
I. Recent Depreciation of the Yen and Monetary Policy
I usually start my speech at the meetings with local leaders by talking about developments in
economic activity and prices. However, this time I would first like to talk about the Bank of
Japan's possible responses to foreign exchange rate developments, while sharing my own
views. This is because the Bank has been receiving an increasing number of opinions
regarding its stance toward the weaker yen, which temporarily approached 160 yen against
the U.S. dollar recently.
First of all, the basic principle is that the sole objective of monetary policy is to achieve price
stability. The concept of the trilemma of international finance shows that no economy can
simultaneously achieve the three goals of autonomous monetary policy, free capital mobility,
and a stable foreign exchange rate. Based on this, if a central bank tries to fix the exchange
rate, which fluctuates in the short term, at a certain level by means of monetary policy, this
induces a trade-off for a large constraint on its future conduct of monetary policy.
Let me apply this idea to the current situation. If a central bank frequently changes its
monetary policy to stabilize a foreign exchange rate that is as highly volatile as recently
observed, swings in interest rates are expected to become larger. Should fluctuations in
interest rates become too large, it will be difficult to project future interest rates, thereby
hindering fund raising for households' housing investment and firms' fixed investment. If
fund raising by firms and households becomes difficult, this inevitably has a negative impact
on economic activity. I therefore believe that, if responses to short-term fluctuations in the
foreign exchange rate are made by means of monetary policy, price stability will be adversely
affected.
Then, in what case should a central bank respond to foreign exchange rate developments
through monetary policy? Currently, the Bank of Japan aims to achieve the price stability
target of 2 percent in a sustainable and stable manner. If a prolonged excessive depreciation
of the yen affects price developments and this is projected to have a negative effect on
achieving the price stability target, it will be an option for the Bank to respond by means of
monetary policy. To give a clear image, I would like to talk about how foreign exchange rate
developments affect prices. Fluctuations in the foreign exchange rate are one factor that
directly affects yen-denominated import prices, which tend to correlate with goods prices
with a time lag. Changes in import prices will spread from upstream to downstream demand
stages in producer prices, and presumably this will eventually spill over into consumer prices
(Chart 1). That said, it warrants attention that the extent of the spillover and time lag is not
fixed, because this depends on how firms at each demand stage pass on cost increases.
Meanwhile, if the rate of increase in this fiscal year's consumer price index (CPI) is pushed
upward through the channel I have mentioned, this could affect the results of the 2025 annual
spring labor-management wage negotiations.
The impact of foreign exchange rate developments on firms' inflation expectations is also an
important factor. Firms' price-setting stance is significantly affected by their medium- to long-
term outlook for inflation for three to five years ahead. In terms of firms' inflation outlook,
the Bank's March 2024 Tankan (Short-Term Economic Survey of Enterprises in Japan) shows
that firms' medium- to long-term inflation expectations have been stable at about 2 percent
since around 2022 (Chart 2). This is evidence that it has become more likely that sustainable
and stable inflation will be achieved. Should there be large swings in these inflation
expectations due to foreign exchange rate developments, the Bank may need to consider
making monetary policy responses.
II. Economic Activity and Prices
A. Economic Activity
1. Current situation
I would now like to talk about economic activity, which can be considered as a
"fundamentals" factor when looking at future developments in foreign exchange rates.
Japan's economy has recovered moderately, although some weakness has been seen in part
(Chart 3). The effects of a suspension of production and shipment at some automakers have
recently been exerting downward pressure on the economy, but I believe this is only
temporary. In my view, if this temporary factor is excluded, the economy is recovering
moderately at the moment. In what follows, I would like to take a look at economic activity
in detail, disregarding this temporary factor that has been pushing down the economy.
Let us first look at private consumption. Faced with the recent high inflation, households are
becoming thriftier. For example, they have been shifting toward lower-priced goods -- such
as private label products -- especially when purchasing nondurable goods, which mainly
include food and daily necessities. However, various statistics and high-frequency indicators
indicate that private consumption has been solid as a whole, led mainly by services
consumption (Charts 4 and 5). Anecdotal information also suggests that appetite for spending
on high-end goods has been strong among high-income individuals and foreign visitors to
Japan.
Next, I will turn to exports. Exports to China and Europe have been lacking momentum due
to stagnation in those economies. Those to the NIEs and the ASEAN economies have
bottomed out, but they have been somewhat weak due to a sluggish rebound in IT-related
demand. However, exports overall have been more or less flat, with those to the United States
having been firm, particularly in automobiles (Chart 6).
Let us now look at business fixed investment. In addition to increasing demand for fixed
investment associated with digital transformation (DX) and green transformation (GX),
demand for construction investment in, for example, urban redevelopment and development
of logistics centers has also been increasing over the past few years. Accordingly, the Bank's
March 2024 Tankan shows that business fixed investment plans maintain high growth.
However, actual data continues to fall behind the solid plans presented in the Tankan (Charts
7 and 8). This may be because it has been difficult for firms to project future external demand
due to uncertainties regarding developments in overseas economies, and also because
business fixed investment has been delayed due to a shortage of the human resources needed
to actually construct and set up new buildings and facilities. However, despite such delays,
investment plans continue to show firmness, suggesting that firms' appetite for investment
remains strong. Let me also note that I consider developments in business fixed investment
an extremely important factor since it holds the key to achieving the price stability target.
Hence, Japan's economy is certainly not stagnant, but, as a number of uncertainties remain, it
cannot be said to be buoyant.
2. Outlook
Next, regarding the outlook for economic activity, I believe that Japan's economy has started
to show many encouraging signs of an upturn.
Let me start with private consumption. Disposable income is expected to increase on the
whole as the provisional results of the 2024 annual spring labor-management wage
negotiations have significantly exceeded the 2023 level, despite some differences observed
in the level of wage increases among individual firms. The amount outstanding of households'
financial assets, which are savings, or "stocks" when thinking in terms of flow and stock, has
increased substantially, mainly due to a rise in stock prices at home and abroad (left panel of
Chart 9). Furthermore, with significant wage increases expected for a second consecutive
year, households' expectations for an increase in their permanent income may be heightening,
reflecting their anticipation that wages will continue to rise (right panel of Chart 9). Given
that these factors are already pushing up consumer sentiment at present, private consumption
is expected to remain firm.
Exports and business fixed investment are projected to rise from the current levels. One
reason for this is that there have been signs that overseas economies will recover after
bottoming out. By region, the U.S. economy has remained firm, mainly led by private
consumption. The Chinese economy is likely to gradually move out of its slowing phase
owing to the government's economic measures, although it will still take time for adjustments
in the real estate market to be completed and for structural issues such as those pertaining to
regional economies to be resolved. European economies have shown signs of bottoming out.
Returning to Japan's economy, if a virtuous cycle between wages and prices starts to operate
smoothly, reflecting wage increases in fiscal 2024, growth expectations for Japan's economy
will be revised upward accordingly. Consequently, this could bring about an expansion in
business fixed investment because the necessary capital stock will have increased.
B. Price Developments in Japan
1. Current situation
I will now talk about price developments in Japan.
The year-on-year rate of increase in the CPI has been declining, and it can be said that the
rate is now in a deceleration phase (Chart 10). To examine this movement in detail, I would
like to focus on the frequency of price changes by separating the category of "sticky"
consumer prices, made up of items for which the price changes relatively infrequently, and
"flexible" consumer prices, made up of items for which the price changes relatively
frequently.1 Sticky consumer prices are likely affected by medium- to long-term inflation
expectations and wage developments, whereas flexible consumer prices tend to be affected
by raw material prices that mainly reflect developments in commodity markets.
Sticky consumer prices have continued to rise moderately due to the upward pressure exerted
mainly by wage increases. On the other hand, the rate of increase in flexible consumer prices
seems to be decelerating, as the impact of the pass-through of cost increases stemming from
the rise in import prices has waned. I have therefore judged the rate of increase in the CPI to
be in a deceleration phase because flexible consumer prices currently have a larger impact on
overall consumer prices than sticky consumer prices.
2. Outlook
I will also separate the categories of sticky and flexible consumer prices in talking about the
outlook for the CPI.
First, let me look at flexible consumer prices. On a yen basis, import prices rose sharply,
mainly due to a surge in international commodity prices and to the impact of disruptions in
global supply chains, both of which were observed during the COVID-19 pandemic. After
peaking in September 2022, however, import prices were on a declining trend. They then
bottomed out in July 2023 and turned positive in February 2024 on a year-on-year basis (Chart
11). Because flexible consumer prices move with a time lag of about six to nine months from
changes in import prices, flexible consumer prices may hit the bottom from around summer
to autumn 2024 and start rising thereafter.
Next, I would like to look at sticky consumer prices. The rate of increase in sticky consumer
prices is more likely to rise, reflecting the results of the 2024 annual spring labor-management
wage negotiations. Let me elaborate on this. It is expected to take about a few months for the
results of the 2024 wage negotiations to be reflected in wages. As wage increases are expected
to be reflected in inflation only thereafter, I presume that the momentum for a rise in sticky
consumer prices will increase from around summer to autumn 2024, as will be the case with
flexible consumer prices. Regarding future wage developments, I am concerned that there is
a risk of labor shortages becoming more acute. This is for the following reasons: (1) even if
high wage increases are realized in fiscal 2024, it is unlikely that structural labor shortages
due to the declining and aging population will be resolved, and (2) the number of those who
are not in the labor force is at a historically low level for seniors and women, whose labor
participation has underpinned labor supply to date. Therefore, the current main scenario is
that firms will inevitably continue to need to raise wages to some extent to secure their
workforce. Based on this scenario, sticky consumer prices are likely to rise steadily.
As I have explained, the rate of increase in the CPI is currently in a deceleration phase. That
said, my view is that it could start rising again from around summer to autumn 2024, as far
as can be determined from developments in import prices, producer prices, and wages.
C. Upside and Downside Risks to Economic Activity and Prices
The outlook for economic activity and prices I have presented so far may seem somewhat
optimistic. I should note that it is important to pay due attention to the fact that the outlook is
uncertain as it entails both upside and downside risks. These risks also range from the short
term to the medium to long term.
I will first talk about the short-term risks. As I mentioned earlier, if the yen depreciates further
or remains weak for a prolonged period, this could cause an earlier-than-expected reversal in
the year-on-year rate of increase in the CPI. Moreover, if the reversal occurs and the prospect
of sustainable and stable inflation exceeding 2 percent increases, the Bank may face the need
to adjust the level of monetary accommodation more rapidly than expected by raising its
policy interest rate. On the other hand, if the Bank raises its policy interest rate at an
excessively rapid pace, this will run the risk of economic downturn in Japan. Furthermore,
although it is very unlikely, should an unexpected shock in global financial markets occur,
the preconditions for achieving sustainable and stable inflation could break down.
When considering short-term upside and downside risks, due attention is required to
developments in inflation in the United States. If it takes longer than expected for inflation in
the United States to stabilize, this will make it harder to bring the policy interest rate down
and consequently leave U.S. interest rates at high levels. If the United States continues to see
firm economic conditions even under such circumstances, this could cause the yen to remain
weak for a longer period. Meanwhile, if prolonged high U.S. interest rates cause, for example,
adjustments in the U.S. real estate market to intensify, and this then sparks concern over
financial system stability or induces adjustments in stock prices, market participants may shift
to a "risk-off" mode. In any case, developments in the U.S. economy warrant attention and I
will continue to monitor the situation closely.
Let us now look at the medium- to long-term risks. These include disruptions in international
commodity markets and international distribution systems stemming from geopolitical issues
such as the situation in Ukraine and the Middle East. There is also a risk that the global
economy will become fragmented, reflecting strengthened efforts to address economic
security, and risks pertaining to U.S. fiscal conditions. As I will discuss later, while I foresee
that it will take some more time to achieve the Bank's monetary policy goal of sustainable
and stable inflation, if, in the meantime, medium- to long-term risks materialize, the Bank
may need to change its projected timing for achieving that goal.
It is extremely difficult to precisely predict the upside and downside risks to economic activity
and prices that I have discussed. For this reason, I believe it important to carefully monitor
changes in the environment, including developments in economic activity at home and abroad
and in financial markets.
III. Conduct of Monetary Policy
Changes in the Monetary Policy Framework
Taking account of the economic and price developments I have explained so far, I would like
to talk about the Bank's conduct of monetary policy, while sharing my own views.
First, I will summarize the Bank's current conduct of monetary policy. At the Monetary Policy
Meeting (MPM) held in March 2024, the Bank judged that it was now within sight that the
price stability target of 2 percent would be achieved in a sustainable and stable manner. It
revised the policy framework in this light (Chart 12). Specifically, the Bank terminated large-
scale monetary easing measures, including yield curve control and the negative interest rate
policy, as it considered that these measures had fulfilled their roles. The Bank decided that it
would guide the short-term interest rate as a primary policy tool and that, with the price
stability target of 2 percent, it would conduct monetary policy as appropriate, in response to
developments in economic activity and prices as well as financial conditions, aiming at
sustainable and stable achievement of the target. In addition, the Bank judged that the
inflation-overshooting commitment regarding the monetary base had fulfilled the conditions
for its achievement. It should be noted that these policy changes do not signify a shift to
monetary tightening. In other words, given the current outlook for economic activity and
prices, the Bank anticipates that accommodative financial conditions will be maintained for
the time being.
In hindsight, I believe that these policy changes were implemented smoothly for the most
part, given the absence of any major market disruptions in their wake. At the outset, however,
some voiced the opinion that it would have been better to first confirm incoming data, such
as the results of various economic indicators due to be released in April. I voted for the policy
changes at the March MPM, and I would like to explain my rationale for doing so.
The first reason was that the conditions for changing policy had already been met. Various
conditions were in play. For example, looking at the distribution of the year-on-year rate of
change in the price of individual items constituting the CPI, the shape of the distribution
clearly differs from that at the time of policy changes in 2000 and 2006 (Chart 13). When the
Bank made policy changes in 2000 and 2006, the distribution was weighted to the left,
indicating that a high proportion of items had a negative year-on-year rate of change. This
shape suggests the possibility that the policy changes were taken in a situation where
considerable deflationary pressure remained. By contrast, the price change distribution by
item in the CPI at the time of the March 2024 policy changes was weighted to the right,
indicating that an overwhelmingly high proportion of items had a positive year-on-year rate
of change. This means that the current increase in CPI inflation is not driven by a limited
increase in the price of specific items, but rather, the prices of many items together are
increasing.
The second reason for my vote pertains to the market's understanding of the policy decision.
My concern about making policy changes at the March 2024 MPM was the possibility that
the changes would lead market participants to form a dominant view that monetary policy
had taken an abrupt shift toward tightening. If this happened, it would initially spark a
negative reaction in financial markets. This would then spread to the real economy, causing
the economy to deteriorate, and raising the likelihood that deflationary pressure would
increase again. To avoid this situation, it was important for the Bank to provide appropriate
communication so that market participants would understand that, even if the Bank made
policy changes, it was only part of its efforts to achieve the price stability target, and that
accommodative financial conditions would be maintained for the time being. Fortunately, the
short-term interest rate -- the main policy interest rate target following the March policy
changes -- has remained at a very low level. Given various sources such as anecdotal
information, I feel that market participants have an adequate understanding of the Bank's
intention behind the changes.
The third reason for my vote relates to the 2024 annual spring labor-management wage
negotiations. The first provisional aggregate results compiled by the Japanese Trade Union
Confederation (Rengo) showed that the year-on-year rate of increase in wages (including
seniority- and performance-related wages) agreed in the negotiations was significant at 5.28
percent, which was even higher than the previous year's wage hikes. My thinking was that, if
the first provisional aggregate results indicated a year-on-year increase of at least 5 percent,
that would be a good benchmark for going ahead with policy changes. This was because past
results suggested that, if the annual spring labor-management wage negotiations achieved a
5 percent wage hike, the rate of increase in "sticky" consumer prices, especially services
prices, would likely return to a level in which the achievement of the Bank's price stability
target comes into sight. My view back in January was that the results would not exceed this
benchmark. The reason for my belief was that, although Rengo had set a target for wage hikes
of 5 percent or more at this year's negotiations, experience suggested that the numbers usually
turn out to be lower than the level demanded by labor unions. Thus, I assumed we would have
to make a comprehensive judgment on the timing of policy changes after examining other
data, including economic indicators to be released in April and onward. However, the year-
on-year increase turned out to be 5.28 percent, which took me by surprise.
There may be some issues with the aggregate results of the annual spring labor-management
wage negotiations, such as the range of firms included in the calculations. Judging by the past,
however, these results allow an estimation of wage developments at firms overall. Moreover,
the high figures in the first provisional aggregate results suggest that many firms have enough
encouraging prospects for business performance and plans for improving productivity to
cover wage costs. This gave me reason to expect that the results of economic indicators and
other data to be released in April and onward would be relatively positive; thus, I did not see
the need to wait for those results to come out before making policy changes.
Future Conduct of Monetary Policy
Next, I will talk about the future conduct of monetary policy.
The goal of the Bank's monetary policy will continue to be the achievement of sustainable
and stable inflation, and until this goal is reached, it is important to maintain the current
accommodative financial conditions. The background for this is that, although the
achievement of sustainable and stable inflation has become increasingly more likely, it is still
difficult to affirm that such inflation will be achieved. It is important for the Bank to maintain
accommodative financial conditions until it can be confident of achieving its goal.
The Bank must at all costs avoid hastily raising the policy interest rate, since making
monetary policy changes prematurely would hinder the momentum toward the long-awaited
recovery in Japan's economy. This is why I believe it is vital to keep the real interest rate
negative, in principle. However, at the same time, it is important to be aware of the possibility
that too much focus on downside risks could accelerate inflation and result in the Bank having
to conduct rapid monetary tightening, which could adversely affect the economy. Let me be
a little more specific. If the Bank fixes the policy interest rate at its current level of around 0
percent until sustainable and stable inflation is achieved and begins to raise the policy interest
rate only after this has been achieved, it will, to curb rapid inflation, inevitably raise the policy
interest rate at a much faster pace than the inflation rate. This could in turn have a negative
impact on the economy.
I believe the implication of monetary policy conduct since the outbreak of the COVID-19
pandemic is that it is necessary to be mindful of the risk of projections skewing too much in
one direction; for example, during the pandemic, although risks for prices were expected to
be skewed to the downside, prices actually rose higher than expected. It has therefore become
increasingly important for the Bank, in terms of risk management in its monetary policy
conduct, to take account not only of downside risks but also of upside risks. As long as the
underlying inflation rate continues to rise toward 2 percent, I believe it is vital to adjust the
degree of monetary accommodation gradually in response to developments in economic
activity and prices as well as financial conditions.
Since the framework for yield curve control has fulfilled its long-standing purpose, it is
conceivable that the Bank will reduce the amount of its Japanese government bond (JGB)
purchases at some point in the future. The Bank is currently examining the situation in
financial markets under the framework of JGB purchases revised in March; under the revised
framework, it has continued its purchases at broadly the same amount as before. If the Bank
reduces the amount at a rapid pace in the future, this could cause discontinuous fluctuations
in long-term yields, and such a move might be misinterpreted as an abrupt shift in the Bank's
monetary policy toward tightening, in which case there is a risk of a negative impact being
exerted on the economy, as I said earlier. This is why I believe that, when it comes to reducing
its JGB purchases, it is desirable for the Bank to do so gradually, while taking comprehensive
account of the situation in the bond market in terms of supply and demand conditions, the
degree of functioning, and liquidity conditions.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kumamoto
May 29, 2024
ADACHI Seiji
Member of the Policy Board
Bank of Japan
Chart 1
Spillover Effects of Import Prices on the CPI for Goods
y/y % chg.
y/y % chg. y/y % chg.
60 40 20
50
30 15
40
30 20 10
20
10 5
10
0 0 0
-10
-5
-10
-20
-30 -20 -10
16 17 18 19 20 21 22 23 24 16 17 18 19 20 21 22 23 24 16 17 18 19 20 21 22 23 24
CY CY CY
Import price index ID index (stage 2) ID index (stage 4)
ID index (stage 1) ID index (stage 3) FD index (excluding exports)
ID index (stage 2) CPI for goods (less fresh food and energy)
ID index (stage 4)
Chart 2
Firms' Inflation Outlook for General Prices
y/y % chg.
2.5
3 years ahead 5 years ahead
2.0
1.5
1.0
0.5
0.0
14 15 16 17 18 19 20 21 22 23 24
CY
Note: Figures show the inflation outlook of enterprises for general prices (all industries and enterprises, average) in the Tankan.
Source: Bank of Japan.
Chart 3
Real GDP
s.a., ann., tril. yen
580
560
540
520
500
480
CY
Chart 4
Consumption Activity Index (CAI, Real)
CAI (Travel Balance Adjusted) CAI by Type
s.a., 2019/Q1=100 s.a., 2019/Q1=100
s.a., CY 2015=100
115 115
120
Nondurable goods
110 <40.5> 110
115
Services <50.7>
105
105
110
100 100
105
95 95
100
90 90
95
85 85
90
80 80
85
75 Durable goods <8.9> 75
80 70 70
CY 19 20 21 22 23 24 19 20 21 22 23 24
CY 14 15 16 17 18 19 20 21 22 23 24
Notes: 1. In the left panel, figures exclude inbound tourism consumption and include outbound tourism consumption, and are based on Bank staff calculations.
2. In the right panel, figures in angle brackets show the weights in the CAI. Figures are based on Bank staff calculations.
3. In the right panel, "nondurable goods" includes goods classified as semi-durable goods in the SNA.
Sources: Bank of Japan; etc.
Chart 5
Consumption Developments Based on Credit Card Spending
chg. from baseline, %
50
40
30
20
10
0
-10
-20
-30
Total
-40
Retail (excluding energy)
Services (excluding energy)
-50
Energy
-60
20 21 22 23 24
CY
Notes: 1. Figures are from the reference series in JCB Consumption NOW, which take into account changes in the number of consumers.
The baseline is the average for the corresponding half of the month for fiscal 2016 through fiscal 2018.
2. Figures for the total and for services exclude telecommunications, and figures for energy consist of those for fuel, electricity,
gas, heat supply, and water. Figures are based on Bank staff calculations.
Source: Nowcast Inc./ JCB, Co., Ltd., "JCB Consumption NOW."
Chart 6
Exports
Total Real Exports Real Exports by Region
s.a., 2019/Q1=100 s.a., 2019/Q1=100
s.a., CY 2020=100
120 130 130
120 120
110
110 110
100 100
100
90 90
90 80 80
70 70
80
60 60
China <17.6>
50 NIEs, ASEAN, etc. 50
United States <20.1>
70
<34.4>
Other economies
40 40
EU <10.3>
<17.6>
30 30
60
CY 19 20 21 22 23 24 19 20 21 22 23 24
CY 09 11 13 15 17 19 21 23
Notes: 1. Figures are based on Bank staff calculations.
2. Figures for 2024/Q2 are those for April.
3. In the right panel, figures in angle brackets show the share of each country or region in Japan's total exports in 2023.
Figures for the EU exclude those for the United Kingdom for the entire period.
Sources: Ministry of Finance; Bank of Japan.
Chart 7
Developments in Business Fixed Investment Plans
y/y % chg.
18
15
12 FY 2024
9
6
3
Average (FY 2004-2022)
0
FY 2020
-3
FY 2021
FY 2022
-6
FY 2023
-9
Mar. June Sept. Dec. Forecast Actual
Notes: 1. Figures are based on the Tankan and are for all industries including financial institutions.
2. Figures include software and R&D investments but exclude land purchasing expenses. R&D investment is not covered
as a survey item before the March 2017 survey.
3. There are discontinuities in the data for December 2021 and December 2023 due to changes in the survey sample.
Source: Bank of Japan.
Chart 8
Business Fixed Investment
Coincident Indicators of
Leading Indicators of
Business Fixed Investment Business Fixed Investment
s.a., ann., tril. yen
s.a., ann., tril. yen s.a., CY 2020=100
95 130 13
Machinery orders (private sector, excluding
volatile orders)
12
120
Construction starts (private, nonresidential,
90
estimated construction costs)
11
110
85
10
100
9
80
90
8
Private nonresidential investment
75
(SNA, real, left scale)
80
7
Domestic shipments and imports of
capital goods (right scale)
70
70
6
Private construction completed
(nonresidential, real, right scale)
5
65 60
09 11 13 15 17 19 21 23
09 11 13 15 17 19 21 23 CY
CY
Note: Figures for real private construction completed are based Note: Volatile orders are orders for ships and those from electric
on Bank staff calculations using the construction cost deflators. power companies.
Sources: Cabinet Office; Ministry of Economy, Trade and Industry; Sources: Cabinet Office; Ministry of Land, Infrastructure,
Ministry of Land, Infrastructure, Transport and Tourism. Transport and Tourism.
Chart 9
Factors Affecting Future Private Consumption
Wage Increases and
Households' Financial Assets
Households' Income Outlook
tril. yen
share of respondentsexpecting their income to rise in the next five years, %
2,200
35
30
2,100
25
2,000
20
1,900
15
1,800
10
1,700
5
1,600
0
Decreased or unchanged Increased
1,500
15 16 17 18 19 20 21 22 23
CY
Income over the past year
Source: Bank of Japan. Note: The vertical axis shows the share of respondents who answered that
they expected their wages in five years to be considerably or somewhat
higher than the current wages of those five years their senior in the
same company. The bar labeled "increased" shows this share for
respondents who replied that their income had increased over the past
year, while the bar labeled "decreased or unchanged" shows the share
for respondents who replied that their income had decreased or
remained unchanged over the past year. Figures are based on the April
2023 survey.
Source: JTUC Research Institute for Advancement of Living Standards.
Chart 10
CPI for All Items Less Fresh Food
y/y % chg.
4.5
Mobile phone charges
4.0
Effects of travel subsidy programs
3.5
Effects of the consumption tax
3.0
hike and free education policies
Energy
2.5
2.0
Excluding the above
factors
1.5
CPI (less fresh food)
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
19 20 21 22 23 24
CY
Notes: 1. Figures for "energy" consist of those for petroleum products, electricity, as well as 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.
Source: Ministr