Journal Article
COVID-19 Fiscal Expansion and Inflation Expectations in Japan
Christensen, Jens H. E.; Spiegel, Mark M. (2022-08-03)
The Japanese government’s strong response to the economic fallout from COVID-19 presents an opportunity to examine whether expansionary fiscal policies raise long-term inflation expectations. Analyzing market-based estimates of long-term inflation expectations in Japan shows that announcements of government fiscal stimulus under COVID-19 had no meaningful impact on investors’ long-term inflation expectations. This illustrates the challenge of moving long-term expectations after they become anchored below a central bank’s inflation target, as they have been in Japan.
FRBSF Economic Letter , Volume 2022 , Issue 20 , Pages 5