Supplementary Paper Series for the "Comprehensive Assessment" (1): Developments in Inflation Expectations over the Three Years since the Introduction of Quantitative and Qualitative Monetary Easing (QQE)

More than three years have passed since the Bank of Japan introduced QQE. This article provides analysis on developments in inflation expectations and on factors that have affected those developments during that period. Developments in inflation expectations can be divided into three phases in which inflation expectations rose, were flat, and weakened. While QQE pushed up inflation expectations, exogenous developments, such as the decline in crude oil prices and the volatility in global financial markets stemming from emerging economies, seem to have exerted downward pressure. Inflation expectations in Japan are inclined to develop in tandem with observed inflation; that is, expectations formation is largely adaptive. Thus, since summer 2014, with a fall in observed inflation rates due to exogenous factors, such as the decline in crude oil prices, inflation expectations followed suit, strongly reflecting the fall.