convergence • globalization, market integration, global supply chain • deglobalization, market fragmentation, economic security • large labor supply • declining and aging population • carbonized • decarbonization ( greenflation ) • peace dividend • wartime economy chart 7 government spending and inflation rates : no clear relationship united kingdom united states % y / y % chg. 30 % y / y % chg. 30 government spending to gdp ratio ( left scale ) cpi ( all items, right scale ) - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 % - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 germany % japan y / y % chg. 30 - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 note : figures for germany prior to 1991 are those for west germany. sources : imf ; oecd. y / y % chg. - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 chart 8 government debt outstanding and inflation rates : no clear relationship % united states y / y % chg. 30 government debt outstanding to gdp ratio ( left scale ) 25 cpi ( all items, right scale ) united kingdom % y / y % chg. 30 - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 germany % y / y % chg. 30 y / y % chg. - 5 cy50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 japan % - 5 cy 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 note : figures for germany prior to 1991 are those for west germany. sources : imf ; oecd. chart 9 world trade : stagnant goods, growing services 1, 300 cy 1990 = 100 1, 200 1, 100 goods 1, 000 other commercial services cy 90 note : figures are the sum of exports and imports on a u. s. dollar basis. those for other commercial services exclude travel and transport. sources : wto ; baldwin, r., " globotics and macroeconomics : globalisation and automation of the service sector, " cepr press discussion paper, no. 17530 ( 2022 ). chart 10 determinants of the natural rate of

, and granular data ( chart 2 ). 9 data are about the past. to gain some ideas about the future, surveys and interviews are useful. the bank has been compiling the tankan survey ( short - term economic survey of enterprises in japan ) every quarter. 10 this is the most comprehensive survey of firms, which asks questions about a wide variety of topics such as business conditions, fixed investment plans, and the inflation outlook. reflection # 5 : japan offers exciting research topics japan has been a source of fascinating research topics. the most well - known one is the zero lower bound ( zlb ) or effective lower bound. unfortunately, the bank had to face this zlb sooner than other central banks. through my experience at the bank, i am more convinced than ever that central banks need enough room for the inflation rate so that interest rates do not go down below zero. another important topic is how inflation expectations are formed ( chart 3 ). standard new keynesian models used in modern macroeconomics assume the convergence of the inflation rate with the inflation target. this assumes that inflation expectations are well - anchored to the target rate or converging to it soon. it reminds me of the classic joke about economists when confronted with a can on a desert island : " let us assume there is a can opener. " in reality, inflation expectations are somewhat adaptive, formed through experience. this is especially important in the context where central banks have been trying to anchor inflation expectations at the target level. let me discuss the topic that interests me most. why is deflation bad? it may seem obvious to the general public, but it is puzzling for economists, who tend to think of the economy in terms of real variables. this goes straight to the question why central banks should care about price stability. alan greenspan, former chair of the federal reserve, once voiced concerns https : / / www. boj. or. jp / en / research / bigdata / index. htm. https : / / www. boj. or. jp / en / statistics / tk / index. htm. the tankan survey has been used to estimate firms'inflation expectations ( coibion et al. 2020, p. 13 ). about deflation : deflation would sap pricing power from firms, so that business dynamism would be lost ( greenspan 2002 ; watanabe 2022, pp. 285 - 87 ). in fact, since japanese firms were unable