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But Mr Fukui is at last changing deflationary expectations.
To a significant extent, deflationary expectations are now baked into the Japanese economy.
Deflationary expectations have to be eradicated to get nominal growth back up.How to do that?
When it relaunched the policy last year, it did so with the scale, political support and rhetorical commitment needed to jolt the country out of its deflationary expectations.
The result was an end to deflationary expectations, leading to the most impressive swing the country has ever seen from horrible contraction to rapid growth.
After four consecutive years of falling prices, deflationary expectations are deeply entrenched.A new, and unexpected, dollop of gloom comes from the rest of Asia.
Similar(24)
But Japanese consumers hunkered down in the 1990s and in this decade as they adjusted to a deflationary economy and dire expectations for future growth.
At the November inflation report press conference, Mervyn King said Threadneedle Street's monetary policy committee would "look through the short-term rise in inflation" in the expectation that the deflationary effects of rising levels of unemployment coupled with weak earnings growth would keep price rises firmly in check.
The dollar's bull market is being driven by Fed rate hike expectations as well as deflationary trends in Europe and Japan, which are likely to expand the size of their quantitative easing programs in the near future.
The hope is that this will yank Japan from a debilitating deflationary spiral of lower prices and diminished expectations, stirring what Keynes called the "animal spirits" of investors and consumers.
The third option is that investors have revised down their rate expectations, perhaps because they now expect the ECB to take action tomorrow to head off the deflationary threat.As referred to in a recent post, Pimco's outlook is for the "new neutral" in which real yields are low for longer.
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