but also public policy theory, will be required as those in charge of economic policy, including monetary policy. i thus expect that public policy study itself will be further developed. bis central bankers ’ speeches ii. changes in monetary policy management based on the summary i have just presented, let us look back at changes in monetary policy among public policies. in the united states, europe, and also japan, a central bank ’ s primary mission had long been to secure the smooth functioning of the financial system, rather than ensure price stability or economic stability. for example, the united kingdom experienced repeated financial crises in the latter half of the 19th century. its central bank – the boe – was expected to play the role of preventing disturbance in the financial system as a whole by providing liquidity as a “ lender of last resort ” to financial institutions on the verge of a crisis. in the united states, the federal reserve system was established with the aim of resolving financial system instability, based on the lesson learned from successive financial crises from the end of the 19th century into the early 20th century. this well represents the thinking at the time of the role central banks should play on the financial system front. the bank of japan was established in 1882. in addition to the purpose of sorting out the massively issued government banknotes, there was an aim to establish a modern financial system centering around a central bank. in such a manner, the central banks ’ objective at the time was to prevent the occurrence of a financial panic and to contribute to economic development by ensuring stability of the financial system. this situation gradually changed after the start of the 20th century. in particular, the international gold standard collapsed in the 1930s and each country shifted to a fiat money system. as a result, the supply of central bank money was released from the constraints of their gold holdings, and the extent of latitude in monetary policy increased substantially. partly because of this, the idea of actively aiming to achieve economic stability – notably price stability – through monetary policy spread among major countries. while many central banks shouldered the role of supporting government bond prices amid expansion in fiscal spending during world war ii, monetary policy after the war was separated from debt management policy, and thus recovered its autonomy. since the mid - 1980s – after weathering global surges in commodity prices and general prices due to two oil shocks – prices stabilized and business cycles became smooth in the united states and other major countries. for example, in the advanced countries, from the 1980s until just before

##balancing, and influence expectations of economic entities. in particular, as a major transmission channel, the bank aims to lower real interest rates and stimulate economic activity through changing economic entities ’ expectations and raising their inflation expectations on the one hand, and containing long - term interest rates through massive purchases of jgbs on the other. in addition, through a virtuous cycle, an increase in observed inflation rates resulting from such stimulation to economic activity is expected to lead to a further rise in inflation expectations. it has been eight months since the introduction of the qqe, and it has steadily produced the anticipated effects so far : favorable turns have been observed in the financial market, economic activity and prices, as well as in the public ’ s expectations. first, looking at financial markets, stock prices have risen by about 50 percent since the beginning of the year ( chart 4 ). while long - term interest rates in major advanced economies have risen across the board, those in japan have been powerfully contained due to the massive jgb purchases by the bank. interest rates on 10 - year jgbs have recently declined to around 0. 6 percent from around 0. 8 percent at the beginning of the year. in this situation, inflation expectations bis central bankers ’ speeches appear to be rising on the whole, as seen in various surveys showing that an increased proportion of people consider that prices will rise. as a result, real interest rates have declined, and this has steadily stimulated private demand. against this background, japan ’ s economy has been recovering moderately as a virtuous cycle among income and spending has been operating in both the household and corporate sectors. in terms of real gdp growth rates, the economy continued growing at an annual pace of about 4 percent in the first half of 2013, and has continued to grow at an annual pace of around 2 percent during july - september ( chart 5 ). as for prices, the year - on - year rate of change in the cpi excluding fresh food turned positive in june, and the pace of increase expanded to 0. 9 percent in october ( chart 6 ). a look at the detailed developments in the cpi shows that not only energy - related goods such as petroleum products have pushed up the index, but also that there have been price increases across a wide range of items as private consumption remains firm and the economy continues to recover moderately. with regard to the outlook, as shown in its latest outlook report published a month ago, the bank expects the economy to