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The anchoring of inflation expectations in Japan: A learning-approach perspective

Author

Listed:
  • Hogen, Yoshihiko
  • Okuma, Ryoichi

Abstract

This paper uses a learning model to jointly estimate long-term inflation expectations and the degree of anchoring in Japan since the 1960s. We find that in the 1970s, Japan had higher long-term inflation expectations than the U.S. during the first oil shock, but much lower inflation expectations after the second oil shock. This contrast between Japan and the U.S. is consistent with many studies that attribute the differences in the inflation dynamics between Japan and the U.S. to the monetary policy stance in Japan during the 1970s and early 1980s. Long-term inflation expectations fell to around 2 percent in the late 1980s and remained anchored until the mid-1990s. They fell below 2 percent in the late 1990s, resulting in a low degree of anchoring until the early 2010s. Since early 2013, inflation expectations have risen but are not yet been anchored to the target. Further VAR analysis suggests that declining markups could be a primary source for hindering the anchoring of inflation expectations in Japan.

Suggested Citation

  • Hogen, Yoshihiko & Okuma, Ryoichi, 2025. "The anchoring of inflation expectations in Japan: A learning-approach perspective," Japan and the World Economy, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:japwor:v:73:y:2025:i:c:s0922142524000562
    DOI: 10.1016/j.japwor.2024.101293
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    More about this item

    Keywords

    Inflation expectations; Anchoring; Learning;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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