We estimate the yield curve gap in Japan and examine whether it has contributed to the sustained low growth and low inflation rates observed since the beginning 2000s. We use a semi-structural empirical model that generalizes Laubach and Williams’ approach, considering the entire range of maturities of the interest rates and dealing with the issue of mixed frequency sampling. We consider global factors exerting downward pressures on inflation and examine how the neutral yield curve has affected the snowball effect in the dynamics of the Japanese public debt ratio.