by stimulating the economy. second, they would offer an opportunity on the supply side to encourage the government ’ s growth strategy that contributes to strengthening the growth potential of japan ’ s economy and its fiscal consolidation, as well as positive actions by firms and households. and third, the measures would afford an opportunity to return to the conventional interest rate policy in the future, as zero interest rates produce positive effects through an improvement in economic and price conditions. on the other hand, qqe entails considerable potential risks, in my view ; for example, normalization of the measure will not be an easy process, and speculation that the bank is engaged in financing fiscal deficits could increase. one cannot rule out the possibility that, under the current policy commitment, if financial markets increasingly view achieving the 2 percent price stability target in about two years as difficult, the bank will be obliged to extend or strengthen its monetary easing driven by such external factors, even in a situation where it is judged that side effects outweigh positive effects on the economy. in this regard, my understanding is that the 2 percent price stability target can be consistent with the fundamentals of japan ’ s economy only from a medium - to long - term perspective. i am therefore paying particular attention to the risk that, if the current large - scale monetary easing policy were to be protracted or such policy strengthened by additional measures, the associated side effects would instead outweigh the positive effects, and this would undermine economic stability in the long run. this is why i have proposed that the bank aim to achieve the price stability target of 2 percent in the medium to long term and designate qqe as an intensive measure with a time frame of about two years. my proposal aims at securing an opportunity for the bank to thoroughly examine, after a certain period of time, bis central bankers ’ speeches whether the side effects of qqe are not outweighing the positive effects and review the easing measures in a flexible manner depending on economic and financial conditions at the time. c. monetary policy and structural reforms qqe itself is a powerful policy, but it will exert maximum effects when combined with various efforts by both the public and private sectors. generally speaking, monetary policy can provide indirect support for structural reforms mainly by working on the demand side of the economy, but cannot substitute for such reforms themselves. for example, as i mentioned earlier, various measures on the supply side to strengthen the growth potential of the economy are necessary to increase the potential

( sgp ) which governs fiscal policy and the pursuit of sound public finances by member states ). as we emerge from the pandemic, it seems timely to consider how the eu ’ s macroeconomic framework is working and, in particular, whether it needs a greater intergenerational focus. ( as it happens the european commission started an economic governance review before the pandemic to look at the way the sgp was working, and the ecb is in the process of reviewing its monetary policy strategy. ) i welcome the contribution that others have made to this debate in recent years. 3 looking at the sgp itself, sound public finances and sustainable debt are prerequisites for good policymaking. only with these can economic policy turn to the task of growing the stocks of economic capital in a sustainable way for the long - term. but if we take an intergenerational and more integrated view of our macroeconomic policy challenges – and continuing with climate change as an example – we should be looking at our existing measures of debt sustainability against the investment required to manage the transition to net zero emissions by 2050. in highlighting the challenges of the ‘ green transition ’, the eu ’ s recovery and resilience fund ( rrf ) recognises the pivotal role of fiscal policy in achieving this objective. it also points to an important differentiation between expenditure – which often has an automatic or stabilisation focus – and investment ( in the four capitals ), which has implications for growth, productivity and resilience, and thus for longer - term debt sustainability. 4 this means moving beyond a sole focus on the structural budget balance and recognises the importance of the composition of investment and expenditure as well as its size. ( i would argue that the assets on a sovereign ’ s balance sheet are also relevant when taking a longer term perspective : net worth is a good indicator of sustainability. ) conclusion an important focus of economic policy should be to build resilience to systemic risks and to the transitions that have already started. as we build that resilience, we also need to continue to learn from, and adapt to, events as they unfold. many of our most important macroeconomic policy frameworks were developed 30 years ago. as we contemplate the future – not least the challenges posed by the net zero target – the issue 2 / 3 bis central bankers'speeches we need to debate is whether those frameworks are what we need for the next 30 years. what changes