Japan’s Missing Inflation Anchor Why It Matters for Prices and the Yen

Tsutomu Watanabe

No 26-014E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: For decades, Japanese inflation expectations were anchored near zero, helping stabilize prices but also making it harder for the Bank of Japan to escape deflation. That zero-percent anchor has now largely disappeared. Yet a new anchor at the BOJs 2 percent target has not taken its place. Japan is therefore caught between inflation anchors, leaving expectations—and potentially prices and the yen—more vulnerable to shocks. Establishing a credible 2 percent anchor is now a key challenge for monetary policy.

Pages: 12
Date: 2026-08
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