The Anchoring of Inflation Expectations in Japan: A Learning-Approach Perspective

Yoshihiko Hogen and Ryoichi Okuma
Additional contact information
Yoshihiko Hogen: Bank of Japan
Ryoichi Okuma: Bank of Japan

No 18-E-8, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper employs a model of learning about long-term inflation to jointly estimate long-term inflation expectations and the degree to which they have been anchored to the 2 percent inflation mark over the last half century in Japan. The estimated model shows that long-term inflation expectations declined to about 2 percent in the late 1980s and remained anchored to the 2 percent mark until the mid-1990s. They fell below 2 percent in the late 1990s, which resulted in a low degree of anchoring until the early 2010s. Following the introduction of the price stability target of 2 percent and the launch of Qualitative and Quantitative Monetary Easing in early 2013, inflation expectations rose until early 2015, but have not yet been anchored to the target. A further VAR analysis demonstrates that markups in domestic goods and services markets are one important reason why expectations have not been anchored at 2 percent since the late 1990s.

Keywords: Inflation expectations; Anchoring; Learning (search for similar items in EconPapers)
JEL-codes: D83 D84 E31 E58 (search for similar items in EconPapers)
Date: 2018-04-06
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.boj.or.jp/en/research/wps_rev/wps_2018/data/wp18e08.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:wp18e08

Access Statistics for this paper

More papers in Bank of Japan Working Paper Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().