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We assess the impact of news concerning recent Japanese monetary reforms on long-term inflation expectations using an arbitrage-free term structure model of nominal and real yields. Our model accounts for the value of deflation protection embedded in Japanese inflation-indexed bonds issued since 2013, which is sizable and time-varying. Our results suggest that Japanese long-term inflation expectations have remained positive despite extensive spells of deflation, leaving inflation risk premia mostly negative during this period. Moreover, adjusting for deflation protection demonstrates that market responses to policy changes were not as inflationary as they appear under standard modeling procedures. Consequently, the reforms were less “disappointing” than is widely perceived.