Note 1-14

14 Under low inflation, there are various theories as to the reason for commodity prices and wages increasing their nominal rigidity and thus reducing the fluctuation of inflation rate as compared with the movement of the real economy. Some people argue that it is because prices cannot be revised frequently due to the "menu costs" involved in revising price tags. For detail, see Chapter 1, Section 4 of the "Annual Report on Japanese Economy and Public Finance 2005."