Bank of Japan Governor Haruhiko Kuroda said inflation expectations in practice are highly sticky and change only slowly.
This means that in the actual formation of inflation expectations, the backward-looking component determined by actual inflation rates observed in the past plays a large role, he said in Tokyo on Monday.
Kuroda added that pushing inflation expectations back up to close to the target inflation rate and to re-anchor them there plays an extremely important role in the process of overcoming deflation.
Many central banks around the world have nearly exhausted conventional monetary policy means of lowering short-term interest rates. Responding to deflationary pressures and firmly stabilizing inflation expectations at the desired level represents an unprecedentedly difficult challenge, said Kuroda.
"In this sense, the formation of inflation expectations can be regarded as an "old new" issue of debate," Kuroda added.
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