or two ; in fact, demand has been increasing sustainably. specifically, ( 1 ) demand for goods and services and for labor has been increasing sustainably at a pace exceeding growth in supply capacity ; ( 2 ) production of goods and services has been increasing, and the employment situation has been improving ; and ( 3 ) prices as well as wages have been rising moderately. given these observations, i think that it is difficult to attribute the recent price rises to sluggish supply or supply constraints. ii. conduct of monetary policy the recent macroeconomic performance that i have described so far will also create a desirable situation with regard to conducting unconventional monetary policy. as i will explain, if the potential strength of the economy heightens, the 2 percent price stability target will be achieved more smoothly in a well - balanced manner, with a sustainable economic recovery, and price stability will be maintained. moreover, with the heightened strength of the economy, greater policy effects will be produced while potential negative side effects – such as financial imbalances – will likely be suppressed. a. the 2 percent price stability target in january 2013, the bank released a joint statement with the government and introduced a price stability target of 2 percent in terms of the year - on - year inflation rate of the cpi, making a clear commitment to achieving this target at the earliest possible time. looking back at the situation around that time, some notable progress was made in terms of external factors : downside risks to the global economy caused by the extremely strong headwinds – such as the sovereign debt crisis in europe and the fiscal cliff in the united states – had subsided in the latter half of 2012, and thus uncertainties had diminished to a considerable degree. given these developments, the bank showed its determination to attain sustainable economic growth in japan in coordination with the government, aiming to overcome deflation and dispel deflationary sentiment at the earliest possible time. the japanese people expect to have price stability that is achieved not by a mere price hike, but by a moderate rise in prices brought about by balanced and sustainable economic growth together with improvements in employment, wages, and corporate profits. the bank set the price stability target at 2 percent in terms of the year - on - year rate of change in the cpi based on the recognition that the inflation rate consistent with price stability on a sustainable basis would rise as efforts by a wide range of entities toward strengthening growth potential and competitiveness of the economy made progress. in fact, steady progress has been made

after the establishment of formal diplomatic relationship between the united states and japan, and by then the number of japanese citizens in new york had started to pick up. in fact, this place where we are all gathered tonight, the nippon club - which stands for japan club - will also be celebrating its 100th anniversary this year. benefits from the presence in new york the new york market has continued to grow over the years. time and again, japan has benefited from financial activities in this market. debt issuance following the great kanto earthquake of 1923 is one such instance. when the deal was arranged, the governor of the bank at the time, junnosuke inoue, played an important role. it is interesting to note that his first hand knowledge of the new york market as well as the bonds he formed with u. s. bankers during his tenure as general manager of our new york office proved to be quite valuable for future endeavors. equally significant has been the fact that, over the years, we have had the pleasure of engaging ourselves in countless discussions with such eminent figures as market participants, distinguished scholars, and especially the esteemed federal reserve officials, on topics ranging from monetary policy to financial market developments. on december 1913, the federal reserve act was enacted, and the following year, the federal reserve bank of new york came into existence. through the discussions with the fed, we have 7developed common understandings, such as : the importance of price stability for sustainable economic growth ; the importance of a sound financial system as well as liquid and well functioning financial markets. today, the primary responsibility of the new york office is to develop a channel for a candid dialogue with respectable people widely in the region it covers, that is, both north and south america, but the crucial part is of course the united states, above all, federal reserve officials and banking communities here. it is no exaggeration to say that new york office has been very successful in creating a bond of trust between us. this strong partnership has helped us weather a storm at times of difficulties. at times of no difficulties, too, our new york office gave essential inputs to discussions in tokyo, thereby enabling us to learn a lot about not only the u. s. economy but also economic and financial developments in the world. let me emphasize that our new york office is performing a very important role within the bank of japan. that is not just my personal view, but the entire policy board of the bank appreciates the contribution