Abstract
Exploiting an exogenous variation in trust in the central bank driven by randomized information treatment, this paper examines the extent to which the trust in the central bank affects the inflation expectations in Japan. The findings are twofold. First, information provision about inappropriate statement made by the Governor of the Bank of Japan (BOJ) reduced respondents’ trust in the BOJ by about 1.11 points on a 10-point scale. Second, a one-point decrease in trust in the BOJ raised inflation expectations by 0.63 percentage points and increased the probability of the inflation expectations being outside the BOJ’s target of around 2% by four percentage points.
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