One reason for the difference in the outlook for prices between the Bank and private institutions might be that many private institutions have based their outlook on the Phillips curve during the period of deflation.
Earlier, when I described the outlook for prices, I mentioned that the possibility of the year-on-year rate of change in the CPI increasing to 2 percent through fiscal 2019 is low.
In presenting the projections for prices, the Bank uses the CPI(excluding fresh food) as an indicator that tends to represent the underlying trend in inflation adequately under normal circumstances.
Even so, as in the recent case of crude oil prices changing substantially,a problem arises that the outlook for inflation depends considerably on the assumption for the future path of crude oil prices.
Considering the price-setting behavior of firms in a situation where competition with overseas firms is expected to increase,I cannot help but be cautious with regard to the outlook for prices.
Of those, given that expected short-term interestrates will be determined according to economic and inflation outlooks, if economic activity improves and expectations for future price increases spread, there will be upward pressure on long-term interest rates.
Moreover, the projections for prices in the October 2016 Outlook Report have been revised slightly downward compared with those in July, and the timing of the year-on-year rate of change in the CPI reaching around 2 percent will likely be around fiscal 2018.
This tendency has been taken into account in our projection for prices mentioned earlier, but the degree of decline is uncertain and the sensitivity of prices may turn out to be lower than assumed in the projection..
The sensitivity of prices to changes in the output gap has been declining in recent years due partly to economic globalization.This tendency has been taken into account in the projection for prices mentioned earlier, but the sensitivity of prices may turn out to be lower than assumed in the projection..
The member noted that concern about the downward pressure had been based on the presence of a large output gap. However, since it was technically difficult to accurately measure the potential economic growth rate, which is the basis for calculating the output gap,the member commented that the outlook for prices based on the estimated output gap should be considered with some allowance for error.
Although most participants continued to expect that inflation would rise to the Committee's 2 percent objective over the medium term, a number of participants indicated that, in light of recent developments,they viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside.
Future developments in long-term interestrates depend on market participants' economic and price outlook, but I am paying close attention to whether the price situation and nominal long-term interest rates will develop in a consistent manner in a situation where the rate of increase in the core CPI excluding the effects of the consumption tax hike has been around 1-1/4 percent on a year-on-year basis for six consecutive months.
Considering the relationship between the price outlook and the output gap in light of the Phillips curve, in order for the year-on-year rate of increase in the CPI to reach around 2 percent, it is necessary that the rate respond relatively clearly to an improvement in the output gap-- that is, the steepening of the slope-- and that the Phillips curve shift upward, reflecting a rise in medium- to long-term inflation expectations.
Third is the outlook for price developments under the aforementioned prospects for the economy.
さらに企業や家計の物価見通しも、上方修正されてきています。
Furthermore, inflation forecasts of households and firms are being revised upward.
一方、こうした長期金利の振れが経済・物価見通しの改善を織り込む動きである可能性もあろう。
There is also a possibility that the fluctuations in long-term interestrates reflect the move to factor in improvement in the outlook for economic activity and prices.
金融政策運営以上の経済・物価見通しを踏まえつつ、現在の金融政策の概要についてご説明します。
Conduct of Monetary Policy Let me first outline the Bank's current monetary policy,based on the outlook for economic activity and prices that I have described.
以上述べてきたような経済・物価見通しに対する最大のリスク要因は、海外経済の下振れと考えています。
We consider a downturn in overseaseconomies to be the largest risk factor to the outlook for economic activity and prices I have outlined so far.
As for the outlook for Japan's economic activity and prices, risks-- such as uncertainty over the global economy and volatility in financial markets-- continue to be skewed to the downside.
Second, I believe that it is unnecessary for the Bank to conduct policy changes so as to allow some degree of fluctuation in the long-term yields,at a time when the CPI forecasts of the Policy Board members have been revised downward.
Keys to Assessing the Outlook for Economic Activity and Prices In what follows, I will discuss the keys to assessing the outlook for economic activity and prices in Japan,including several points that I think deserve particular attention in terms of realizing the outlook that I mentioned earlier.
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