Takahide Kiuchi: Recent developments in economic activity, prices and
monetary policy
Speech by Mr Takahide Kiuchi, Member of the Policy Board of the Bank of Japan, at a meeting
with business leaders, Kagoshima, 25 February 2016.
* * *
I. Economic activity and prices in Japan
A. Current situation
I would like to start my speech with a look at developments in economic activity and prices in
Japan.
Japan's economy has continued to recover moderately. Overseas economies - mainly
advanced economies - have continued to grow at a moderate pace, despite the slowdown in
emerging economies. In this situation, exports have been picking up, although sluggishness
remains in some areas, and industrial production has been more or less flat. On the
domestic demand side, business fixed investment has been on a moderate increasing trend
as corporate profits have continued to improve markedly, and private consumption has been
resilient against the background of steady improvement in the employment and income
situation. The first preliminary estimate of the real GDP growth rate for the
OctoberDecember quarter of 2015 was minus 1.4 percent on an annualized quarter-on-quarter
basis. Meanwhile, as for prices, the year-on-year rate of change in the consumer price index
(CPI, all items less fresh food) is about 0 percent.
B. Outlook
Against the background of such developments, the Bank of Japan revised the forecasts for
both economic activity and prices for the period from fiscal 2015 through fiscal 2017 in its
January 2016 Outlook for Economic Activity and Prices (hereafter the Outlook Report).
Comparing the median of the Policy Board members' forecasts in the January 2016 Outlook
Report with that in the October 2015 report, the projection for the real GDP growth rate was
more or less unchanged. In other words, Japan's economy is likely to continue growing at a
pace above its potential through fiscal 2016, and thereafter, through fiscal 2017, is likely to
maintain its positive growth, although with a slowing in its pace, due mainly to the effects
of the consumption tax hike planned in April 2017.
The projection for the year-on-year rate of change in the CPI (all items less fresh food) for
fiscal 2016 was revised downward somewhat largely, due to the assumption of lower crude
oil prices. Specifically, the projection was revised downward from 1.4 percent in the
October 2015 Outlook Report to 0.8 percent in the January 2016 report. For fiscal 2017,
however, the projection was more or less unchanged at 1.8 percent. In other words, the
year-on-year rate of change in the CPI (all items less fresh food) is likely to be about
0 percent for the time being, due to the effects of the decline in energy prices, but the rate will
likely accelerate gradually, on the assumption that crude oil prices will rise moderately.
II. Considerations regarding the outlook
A. Policy board members' baseline scenario and my outlook
I believe that Japan's economy has already regained stability that is consistent with its
growth potential, mainly due to the effects of quantitative and qualitative monetary easing
(QQE). This can be seen by how the output gap - which represents the degree of utilization
of production capacity and labor - recovered to a more or less neutral level at around the
end of 2013 from being significantly negative at the time of the introduction of QQE, and
has remained at almost the same level thereafter. Moreover, I think that the underlying
trend in inflation has also already regained stability that is consistent with the growth
potential of Japan's economy. According to my baseline scenario for the outlook, such stable
economic and price conditions will continue through fiscal 2017 - the projection period
covered in the January 2016 Outlook Report.
However, my view on the outlook for Japan's economic activity and prices, when expressed
in figures, is more cautious compared with the median of the Policy Board members'
forecasts in the January 2016 Outlook Report. I hold a relatively cautious view based on the
following two reasons. First, the potential growth rate of Japan's economy, which
represents - from the supply side - the pace of growth that is consistent with the economy's
growth potential, is currently estimated to be around 0.5 percent or lower, and thus has
stayed at a low level. Given this situation, I believe that its pace of improvement is likely to
remain moderate. Second, I do not think that there is a strong driving force from the demand
side - including in terms of the additional effects of monetary easing - that will even
temporarily bring about economic growth at a pace much higher than its potential and clearly
improve the output gap.
Let me share some of my considerations regarding the outlook with you.
B. Corporate profits and business fixed investment
Corporate profits have been at high levels, and it has been expected that making active use
of corporate funds to increase business fixed investment and wages in Japan would make
the virtuous cycle from income to spending operate more effectively. However, I personally
consider that fixed investment and wages have not increased to the extent initially expected.
While this situation is largely due to the fact that the recent improvement in corporate
profits has been supported by temporary factors, I believe that it also is attributable to firms'
assessment that the domestic market has not yet improved sufficiently. For example, while the
recent improvement in current profits of large manufacturing firms has been brought about
largely by factors that cannot necessarily be considered sustainable, such as the
depreciation of the yen and low crude oil prices, the contribution of the increase in domestic
sales volume to such profits is limited. Moreover, the potential growth rate has stayed at a low
level, and its pace of improvement is likely to remain moderate. Under these circumstances,
firms would make active use of their profits in overseas markets - where expectations are
high for increases in sales and profits - while in the domestic market, they would maintain
their cautious stance toward spending.
Based on these developments, for firms to increase fixed investment relative to cash flow, I
think that a rise in their growth expectations for the domestic market is indispensable.
However, with strong headwinds such as the population decline with a low birth rate and
aging, I personally consider that it would still take considerable time to raise the growth
potential of Japan's economy through various measures and thereby raise firms' medium- to
long-term growth expectations for the domestic market.
C. Real income and private consumption
In my view, private consumption has continued to lack momentum on the whole, although it
has somehow maintained its resilience supported by the favorable environment, such as the
improving employment and income situation and accommodative financial conditions. I think
that some of the factors behind this sluggishness in consumption have been that, in addition
to such temporary factors as bad weather, consumers have been more acutely sensing
inflation while their expectations for wage increases have stayed low. Indeed, since around
spring 2015 in particular, prices of a wide range of food and daily necessities have been
raised while the rate of increase in wages has remained moderate, and this may have
negatively affected consumer sentiment to a considerable degree.
Let us look at this situation from the perspective of monetary easing effects. While real
interest rates continued to decline due to the policy effects of QQE at the time of its
introduction, there was no significant change in the outlook for real income. Therefore, a
monetary easing effect emerged - that is, the bringing forward of future consumption.
Currently, however, the pace of the decline in real interest rates has been slowing on the
whole, and in this situation, consumers seem to be increasingly expecting that the rate of
increase in wages will not immediately catch up with that in prices. Therefore, the outlook for
real income may have deteriorated, thereby leading to conservative consumption activity.
In relation to this, according to the Bank's December 2015 Opinion Survey on the General
Public's Views and Behavior - although the results of the survey are subject to a
considerable margin of error due to the limited number of respondents - while the proportion
of respondents who described the price rise as "rather unfavorable" was 82.4 percent
(82.5 percent in the September survey), the proportion of those who described the price
decline as "rather favorable" jumped to 52.4 percent from 23.8 percent in the September
survey. I think that these results suggest the possibility that there are concerns among
consumers about a decline in real income due to price rises. Going forward, if the positive
effects of the decline in energy prices on real income run their course, consumption activity
might become even more conservative. This trend may be observed more clearly among
elderly households, including those of pensioners, and low-income households, taking into
account, for example, the recent improvement in their sentiment reflecting the decline in
energy prices.
D. Overseas economies and Japan's exports
Exports have shown signs of picking up. Real exports for the October-December quarter of
2015 have increased for the second consecutive quarter, mainly in those of motor vehicles
and IT-related goods, registering an increase of 2.8 percent on a quarter-on-quarter basis.
However, I personally consider that, from the January-March quarter of 2016 onward, the
pace of growth in exports is likely to slow due to a dissipation of the effects of the introduction
of new cars to the market and to weaker-than-expected demand related to new models of
smartphones. Accordingly, there is a possibility that the pace of increase in industrial
production will decline markedly in and after the April-June quarter.
Regarding the environment surrounding exports, the outlook for overseas economies is not
optimistic. In the United States, firmness in private consumption has been maintained
supported by the favorable income situation and financial conditions, but production activity
in the manufacturing sector has been stagnant accompanied by inventory adjustments,
reflecting weak exports bound for emerging economies and sluggish demand of
energyrelated firms for capital goods. Although we cannot make a simplistic comparison with the
past, the current phase of economic recovery in the United States has already lasted for a
period longer than the average of past recoveries, and this is a matter of some concern in
view of the sustainability of the current recovery.
Excess production capacity and excess debt in emerging economies including China should
not be overlooked as downside risks to the global economy as a whole. Since the global
financial crisis, corporate debt has increased significantly in countries such as China, Turkey,
and Brazil. A breakdown shows that (1) debt related to commodities and energy reflecting
excessive expectations for growth in demand for these goods accounts for a considerable
share, and (2) not a few countries carry a large share of foreign currency-denominated
debt. It cannot be denied that the slowdown in emerging economies could gradually
heighten pressure to reduce debt, thereby starting a downward spiral in the economies in
a mutually reinforcing manner. Furthermore, I am paying due attention to the risk that the
change in the global flow of funds - triggered by the fall in commodity prices as well as the
change in financial and economic conditions in the United States - might rapidly heighten
pressure to reduce debt, through the depreciation of currencies and the rise in the long-term
interest rates in emerging economies.
If growth in overseas economies decelerates due to the materialization of the aforementioned
risks and exports clearly turn to a decreasing trend, this might push down production activity
in Japan and negatively affect business fixed investment, as well as private consumption
through deterioration in employment conditions. Furthermore, I am paying attention to the
possibility that volatile movements observed in global financial markets since the beginning
of 2016 will cause the economic activity of firms and households to become cautious. I
therefore consider the outlook for overseas economies and financial conditions as major
downside risks to Japan's economy.
E. Price developments and the outlook
The underlying trend in consumer prices, in terms of the year-on-year rate of change in the
CPI for all items less food and energy and that for all items less fresh food and energy,
showed some signs of peaking out in the October-December quarter of 2015, after having
risen markedly in the first half of the fiscal year. Meanwhile, the year-on-year rate of
increase in the trimmed mean - an indicator intended to capture the trends of price
movements by mechanically excluding items with large price fluctuations - has been
relatively stable at around 0.5 percent recently, a level somewhat higher than before.
As for the outlook, I think that there is not much room for these indicators, which are
intended to capture the underlying trend in prices, to see a further rise in their year-on-year
rates of increase, given that (1) the effects of the depreciation of the yen on a year-on-year
basis have almost run their course; (2) materials prices and the producer price index (PPI),
both of which represent upstream prices, have been on a clear declining trend; (3) upward
pressure on prices stemming from the output gap is not, in my opinion, likely to increase
noticeably; and (4) the rise in medium- to long-term inflation expectations seems to have
paused. Furthermore, my impression is that plans to raise sales prices of food and daily
necessities - which many firms announced at around the beginning of 2015 - are not so
common this year. Therefore, I believe that there is a risk that the year-on-year rates of
increase in these indicators around the April-June quarter of 2016 will come in somewhat
lower than expected.
In considering the outlook for prices, it also is important to focus on the relationship
between prices and wages. Although wages as a whole have risen moderately, I think that
wage growth has been weaker than expected despite the extremely tight labor market
conditions. The background to this is that, as is the case with business fixed investment,
firms remain cautious about raising scheduled cash earnings of their employees as this will
lead to an increase in fixed costs, in a situation where their growth expectations for Japan's
economy have not risen clearly. I think that this stance by firms is also constraining a rise in
households' medium- to long-term expectations for income growth, or in other words, a rise
in growth expectations for permanent income. Moreover, it is possible that sluggishness
in the outlook for the rate of increase in real income would constrain private consumption,
thereby exerting downward pressure on prices.
Taking these factors into consideration, I personally believe that the underlying trend in
inflation is likely to maintain a relatively stable level without declining substantially for the time
being, albeit growing at a reduced pace. On this basis, I expressed dissent from the
description presented in the January 2016 Outlook Report regarding the year-on-year rate of
change in the CPI (all items less fresh food) that the timing of reaching around 2 percent is
projected to be around the first half of fiscal 2017. Even at this point, I still hold the view that
the year-on-year rate of change in the CPI (all items less fresh food) will be about 0 percent
for the time being, and thereafter accelerate very moderately, and consider that the rate of
change is unlikely to reach around 2 percent even through fiscal 2017 - the projection period
covered in the January 2016 Outlook Report.
III. Conduct of monetary policy
A. My proposals at times of QQE decisions
1. The Bank's decisions leading to QQE with a Negative Interest Rate
The Bank decided to introduce QQE in April 2013 with a view to achieving the price
stability target of 2 percent in terms of the year-on-year rate of change in the CPI at the
earliest possible time, with a time horizon of about two years. In October 2014, the Bank
expanded QQE. The specific measures of the expansion included (1) acceleration in the
annual pace of increase in the monetary base from about 60-70 trillion yen to about
80 trillion yen, and (2) an increase in the Bank's Japanese government bond (JGB)
purchases so that the amount outstanding of its holdings would be increased from an annual
pace of about 50 trillion yen to about 80 trillion yen. And, in December 2015, the Bank
adopted the following as supplementary measures for QQE for such purposes as
facilitating its smooth implementation: (1) extension of the average remaining maturity of JGB
purchases; (2) establishment of a new program for purchases of exchange-traded funds
(ETFs); and (3) an increase in the maximum amount of each issue of Japan real estate
investment trust (J-REIT) to be purchased.
The Bank took another step forward in January 2016 by introducing QQE with a Negative
Interest Rate, under which it would apply a negative interest rate of minus 0.1 percent to
some of the outstanding balance of current accounts that financial institutions hold at the
Bank.
2. My proposals at times of QQE decisions
I supported the decision to introduce QQE in April 2013, judging that its scale was one in
which the associated positive effects would just about outweigh the side effects when
confined to a certain time period. At that point, however, I considered that the side effects
would outweigh the positive effects over time. I therefore continued to submit a proposal -
that is, to designate QQE as an intensive measure with a time frame of about two years,
and thereafter to review the monetary easing measures in a flexible manner - since the
introduction of QQE through the Monetary Policy Meeting (MPM) held in March 2015. This
was because, while I personally considered it difficult to achieve the price stability target
of 2 percent in a short period of time, I was concerned that, if the Bank carried out QQE
with the rigid purpose of achieving the 2 percent price stability target, the policy decided
at the time of introduction would be more protracted or strengthened than expected and the
side effects would increase in a cumulative manner.
On the decision to expand QQE in October 2014, I cast a dissenting vote based on the
judgment that the timing of the associated side effects outweighing the positive effects
would be moved forward. Since then, I have continued to cast a dissenting vote on the
guidelines.
Moreover, I submitted a proposal in April 2015 that included a reduction in the annual paces
of increase in the monetary base and in the amount outstanding of the Bank's JGB holdings
from the current ones of about 80 trillion yen to about 45 trillion yen, which would be levels
below the initial paces employed at the time of the introduction of QQE. Thereafter, I have
continued to submit the same proposal through the most recent MPM held in January 2016,
which was formulated based on the judgment that the associated side effects were
outweighing the positive effects even under the guidelines employed at the time of the
introduction of QQE, in terms of such aspects as the pace of the Bank's JGB purchases.
This judgment was formed on careful examination of whether the side effects of QQE were
outweighing the positive effects given that two years had passed since the introduction.
Meanwhile, in December 2015, as they were inconsistent with my proposal mentioned
earlier, I cast a dissenting vote on adoption of the following supplementary measures for
QQE: (1) extension of the average remaining maturity of JGB purchases; (2) establishment
of a new program for purchases of ETFs; and (3) an increase in the maximum amount of
each issue of J-REIT to be purchased.
In addition, in January 2016, I cast a dissenting vote on the introduction of QQE with a
Negative Interest Rate, mainly because it would have adverse effects on the smooth conduct
of the Bank's JGB purchases and therefore would only be an appropriate policy measure in
a crisis situation.
3. Thinking behind my proposal
My proposal, which I have continued to submit at MPMs since April 2015, has not been
intended to reduce the stock of the Bank's asset holdings, but to reduce the pace of increase
in such holdings. I have considered the following as consequences of the Bank's change in
the current guidelines of the annual pace of increase in the amount outstanding of its JGB
holdings to about 45 trillion yen, a level below the initial pace employed at the time of the
introduction of QQE: the excessive pressure on the JGB market would be eased
considerably, and the Bank's JGB purchases, for the time being, would be more sustainable
and stable as the risk that the Bank faces a limit to its JGB purchases at an early stage
subsides. Meanwhile, even if the paces of increase in the monetary base and in the amount
outstanding of the Bank's JGB holdings were to be reduced, accommodative financial
conditions would be strengthened in a cumulative manner as the amount outstanding of its
asset holdings increases. Given that it will take considerable time before the end of QQE -
that is, when excess reserves are depleted and the amount outstanding of the Bank's JGB
holdings is normalized - the Bank must be careful when deciding on policies.
Next, I would like to elaborate on the thinking behind my proposal, focusing on policy
effects and side effects.
B. Policy effects and side effects
1. Policy effects through long-term real interest rates
I think QQE is effective in increasing domestic private demand, mainly through a decline in
long-term real interest rates, bringing forward future real private consumption. In this
regard, by way of pushing down long-term real interest rates, the cumulative policy effects
already have firmly taken hold in Japan's economy, as especially evident by the following
developments: (1) the output gap in Japan recovered to a more or less neutral level at
around the end of 2013 and has generally stayed at this level; and (2) the gap has narrowed
between the actual inflation rate and the medium- to long-term expected rates of inflation,
on which basis firms and households carry out their economic activities.
However, I consider that the additional effects of QQE have been diminishing. This is
because long-term real interest rates, which showed a marked decline for about a year after
the introduction of QQE, have generally seen a slowdown in their pace of decline since
around the middle of 2014, although the levels of these rates were reduced somewhat very
recently due to the introduction of QQE with a Negative Interest Rate. Medium- to long-term
inflation expectations in various surveys and market indicators have been at a level that
remains far from the price stability target of 2 percent, and some recent results showed a
downward trend.
Under these circumstances, I believe it remains difficult to encourage a rise in medium- to
long-term inflation expectations solely through the Bank's policy measures. Long-term real
interest rates have become less likely to decline despite the continued increase in the
amount outstanding of the Bank's JGB holdings, and therefore the additional effects of QQE
have been diminishing. Given this situation, I consider that a reduction in the pace of the
Bank's JGB purchases will only marginally decrease the additional effects of QQE, while it
can restrain the increase in its side effects, thereby enabling the balance between the positive
effects and the side effects to improve.
2. Attention required to potential side effects of QQE
The side effects of QQE have not yet materialized fully because they are mostly potential
effects. However, due attention needs to be paid because, once they do materialize, it will
become difficult to handle them appropriately and promptly. Given this, I am personally
paying particular attention to the side effects of QQE arising from the Bank's large-scale
purchases and holdings of JGBs, which impair the proper functioning of the JGB market.
Specifically, these particular side effects include risks such as the following: (1) the proper
functioning of the JGB market - in terms of liquidity and the price-discovery function - will
be impaired and financial institutions' profits will deteriorate, both of which could lead to
instability in the financial system; (2) interest rates will rise in the course of normalizing
monetary policy; and (3) drastic fluctuations in JGB prices will cause revisions to prices of a
wide range of financial products and assets, thereby exerting severe effects on the financial
system and economic activity. With the Bank's large-scale JGB purchases, I consider that
attention should also be given to (1) the further heightening of the possibility that the Bank's
large-scale JGB purchases will be perceived as central bank financing of fiscal deficits;
and (2) the impairment of the mechanism to maintain fiscal discipline through interest rates,
reflecting overly heightened expectations that the stability in the JGB market will be ensured.
3. Sustainability of JGB purchases and stability of interest rates
From the perspective of the side effects regarding the Bank's JGB purchases, I would also
like to discuss the sustainability of such purchases and stability of interest rates.
Under QQE, the share of the Bank's holdings in the JGB market has continued to increase.
As of September 30, 2015, the Bank held about 30 percent of the total outstanding amount
of JGBs issued. Meanwhile, financial institutions in Japan need to hold a certain amount of
JGBs for such purposes as collateral for transactions, a safe asset portfolio in
assetliability management (ALM), and compliance with financial regulations. Therefore, it is not
possible for the Bank to hold all of the JGBs issued. Looking at the share of central banks'
holdings in the respective government bond markets, in 2016, the Bank of Japan's share
of holdings will exceed that of the Bank of England at its peak level and proceed into
unprecedented territory for a major central bank. In addition, purchasing government
bonds in Japan is potentially more difficult than in other countries given that, while the share
of overseas investors - who tend to hold JGBs for short-term trading purposes - is
small, a large share is held by life insurance companies and pension funds - which tend to
hold JGBs to maturity.
So far, the Bank has conducted outright purchases of JGBs smoothly and a technical problem
has not materialized. Nevertheless, if financial institutions in Japan become more risk averse
due to concerns over overseas financial markets, for example, and increasingly prefer to
hold JGBs, this may tighten supply and demand conditions of JGBs and in turn abruptly
make it difficult for the Bank to continue with its JGB purchases. I personally believe that
such potential risks have increased steadily with the progress in the Bank's large-scale
JGB purchases.
I do not think that the economy and financial markets will be negatively affected to a large
degree if long-term nominal interest rates rise as improvement in economic and price
conditions brings about an increase in medium- to long-term inflation expectations and an
upward revision to the outlook for the economic growth rate. However, if long-term
nominal interest rates rise due to a rise in term premiums on JGBs - which are determined
by factors other than inflation expectations and the outlook for short-term interest rates -
caused, for example, by concerns over the sustainability of the Bank's JGB purchases, the
subsequent impact on the economy and financial markets could be serious. Therefore, it is
important to prevent a significant rise in term premiums.
Based on the thinking that, under the Bank's policy of purchasing JGBs, term premiums are
determined not only by the current amount outstanding of the Bank's JGB holdings but also
by the projection for the amount outstanding, if market participants suddenly become
concerned about a limit to the Bank's JGB purchases, they may revise their forecasts that
the time frames for such purchases and for maintaining the amount outstanding of the
Bank's JGB holdings will be shorter than expected, or that the peak level of the amount
outstanding of its JGB holdings will be lower than expected, thereby leading to a significant
rise in term premiums.
In relation to this, I view the mindset that it is acceptable for the Bank to continue with its
JGB purchases until a limit comes into sight as inappropriate. Considering that financial
institutions need to hold a certain amount of JGBs for such purposes as collateral, as
mentioned earlier, there will be a phase in which they will not sell their JGB holdings
actively even amid declining interest rates. In this situation, as the responsiveness of
interest rates to the level of JGB demand will decline substantially, there is a possibility that
interest rates will tend to show large fluctuations, thereby exerting severe effects on financial
markets and the economy. When reaching such a phase, it also is likely that the Bank will
face difficulties, including in terms of reducing the amount outstanding of its JGB holdings
while maintaining financial market stability, and the normalization of QQE will not be an
easy process. Furthermore, there is a possibility that fiscal risks will heighten as interest rates
fluctuate largely depending on the government's debt issuing policy and its outlook.
4. Financial soundness of the Bank
As another potential side effect that will heighten steadily from maintaining QQE for a
protracted period, I am paying attention to the effect on the Bank's profits and balance sheet
when it raises interest rates applied to excess reserve balances of financial institutions'
current accounts at the Bank in the course of normalizing QQE.
Under QQE, the Bank has conducted large-scale JGB purchases and its annual interest
income on JGBs has exceeded 1 trillion yen. Meanwhile, the Bank has financed such
purchases at low cost through financial institutions' current accounts at the Bank - to most
of which is currently applied a positive interest rate of 0.1 percent - and issuance of
banknotes, which entails little cost. Therefore, with the continuation of QQE, the Bank's
profits have continued to improve amid the increase in net interest income, which is the
difference between interest income on JGBs and interest payments on excess reserve
balances of financial institutions' current accounts at the Bank. This net interest income can
be regarded as seigniorage under QQE. Most of the Bank's profits are paid to the
government and this constitutes government revenue; therefore, seigniorage has the effect
of indirectly reducing the tax burden on the private sector.
However, it should be noted that, in the course of normalizing QQE in the future, due to the
Bank's current accounting rules under which securities are valued at amortized cost, its
interest income on JGBs will increase only moderately despite rises in long-term interest
rates. On the other hand, depending on when and how interest rates applied to excess
reserve balances of financial institutions' current accounts at the Bank are raised, payment
of such interest could increase substantially and a negative spread could occur. This could
lead to a deterioration in the Bank's profits and impairment of its capital, and at the same
time cause a possible decrease or delay in the Bank's payment to the government, which in
turn could decrease government revenue. What is notable here is that the more protracted
the period of maintaining QQE and the higher the level of excess reserves at the Bank, the
larger the magnitude of such effects.
In the long run, it can be expected that, on the back of a rise in long-term interest rates, the
negative spread will be resolved with a gradual increase in the Bank's interest income on
JGBs, and the environment for its profits will improve, making it possible for the Bank to
restore its capital. As a result, the effects of QQE on the Bank's profits, and ultimately on
government revenue, may be considered neutral from a long-term perspective.
Nevertheless, the path toward realization of this projection is highly uncertain, as it depends
on the actual m