2 ) a tightening of labor market conditions due to the effects of various economic stimulus measures taking hold. if the observed inflation rate — as a result of the past rise in energy prices and the depreciation of the yen — rises, people ’ s inflation expectations are likely to change gradually through the adaptive formation mechanism. the bank ’ s pursuit of monetary easing through its strong commitment to achieving the price stability target is also expected to contribute to a rise in people ’ s inflation expectations. under these circumstances, prices are likely to gradually turn to a clear uptrend. in terms of the median of policy board members ’ forecasts in the april 2017 outlook report, the rate of increase in the cpi for all items less fresh food is projected to steadily accelerate to 1. 4 percent for fiscal 2017 and 1. 7 percent for fiscal 2018. i feel comfortable with this outlook and believe that the momentum toward achieving the price stability target of 2 percent is intact. ii. monetary policy in september 2016, the bank introduced quantitative and qualitative monetary easing ( qqe ) with yield curve control as a new framework for strengthening monetary easing. the framework consists of the two components of an inflation - overshooting commitment and yield curve control. under the inflation - overshooting commitment, the bank commits itself to continuing to expand the monetary base until the observed year - on - year rate of increase in the cpi for all items less fresh food exceeds the price stability target of 2 percent and stays above the target in a stable manner. let me note that the effects of monetary policy spread through the economy with a certain time lag. therefore, central banks in general conduct monetary policy in a forward - looking manner based on projections for economic and price developments. in this respect, the inflationovershooting commitment is an extremely strong commitment in that it is linked to observed cpi inflation. as i mentioned earlier, in japan, the expectation — shaped by past experience — that prices will not rise much in the future is deeply entrenched. in this situation, i believe that a strong commitment like this is necessary in order to try to enhance public confidence that the price stability target will be achieved and thereby raise inflation expectations. under yield curve control, the bank facilitates the formation of short - and long - term interest rates that are considered most appropriate in light of the 2 percent price stability target. in the current guideline for market operations, the target level for the short - term policy interest rate is set to minus 0.

elections in major countries, as well as uncertainty associated with debt problems including those in the financial sector. while such uncertainty is likely to continue to weigh on the economy, it is highly likely that the european economy will continue to grow moderately as a trend. let me turn to emerging economies. the chinese economy has continued to see stable growth and is expected to remain on a stable growth path on the whole. this is due to the flexible fiscal and monetary policy conduct by the authorities, although factors such as adjustments of excess production capacity are likely to exert downward pressure on the economy. many other emerging asian economies have recently shown a sharp increase in exports. in commodity - exporting economies such as russia and brazil, positive developments, including improvements in the trade balance and in business and consumer confidence indicators, have been observed following the bottoming out of commodity prices. as for the outlook, emerging and commodityexporting economies are expected to grow moderately, supported mainly by the effects of the recovery in advanced economies and of economic stimulus measures gradually taking root. 1 / 6 bis central bankers'speeches needless to say, the outlook is not free from uncertainty. as i mentioned earlier, there is persistent uncertainty over issues such as u. s. economic policies, negotiations on the united kingdom ’ s exit from the eu, and elections in major european countries. given that economic fundamentals have recently been sound, it is relatively unlikely that markets will become excessively risk averse in the near term. in fact, contrary to previous expectations, markets reacted favorably to the outcome of the u. s. presidential election. over the long term, however, economic activity around the world will inevitably be affected if uncertainty over the issues i mentioned heightens further. i believe that particular attention needs to be paid to the fact that this uncertainty is linked to signs of a growing protectionist mood. over the past few decades, global economic growth has been driven by the expansion of trade and direct investment, spurred by technological innovation. today, complex supply chains have been established at the global level. if the protectionist mood gains traction, this will restrain trade and direct investment, making it necessary to rebuild existing supply chains. this could cause significant disruption to the global economy and deprive it of its main growth engine. for the global economy to maintain stable growth over the long term, it is essential to ensure the freedom of trade and direct investment. b. japan ’ s economy next, i will discuss developments in japan ’ s economy.