IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/26004.html

Inflation Expectations in Japan: Forecast revision and forecast trends

Author

Listed:
  • Weiyang ZHAI
  • Yushi YOSHIDA

Abstract

Inflation expectation is one of the essential components of monetary policy decisions. Upon examining Japanese inflation expectations between 1991:Q4 and 2025:Q1, we propose a modified empirical model that includes a forecast trend term in addition to the forecast revision term. We found that the forecast trend term affects the forecast errors. The full sample results indicate that people in Japan form non-rational expectations with information rigidity. However, this holds only in the recent episode of inflation following the post-COVID period. During the zero-inflation periods, people formed full-information rational expectations. In addition, we find evidence that consumption tax hikes affect the forecast errors, partly due to the uncertainty about future implementation. In both periods, the possibility of deviating from rational expectations cannot be ruled out.

Suggested Citation

  • Weiyang ZHAI & Yushi YOSHIDA, 2026. "Inflation Expectations in Japan: Forecast revision and forecast trends," Discussion papers 26004, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:26004
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/26e004.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:26004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.