to control inflation. i was saying that our monetary policy has to be tight. this is absolutely necessary for various reasons. first, because inflation is still high. second, because we have to combat the forces of inertia of our history. but also because monetary policy should take into account the current context of uncertainty, with the top two world powers having engaged in a trade dispute. the upcoming presidential election in argentina is another source of uncertainty. this endogenous rate reflects the current uncertainty. let me briefly refer to the slight decrease in the interest rate on liquidity bills ( leliqs ) in the past few days. such a drop should not be mistaken as a loosening of monetary policy. it is explained by the drop in inflation and in expected inflation in recent months. 1 / 2 bis central bankers'speeches however, the real interest rate continues and will continue to be positive. the real interest rate has been positive for nearly 9 months, a historical exception that should, actually, be the rule. our tight monetary scheme guarantees this result. in fact, as the leliq rate decreased in the past few days, the real rate slightly increased. this is the endogenous dynamic of the interest rate in the current context of uncertainty. high interest rates carry a cost for many sectors in the short term. however, the alternative carries a higher cost in the current context. this monetary policy protects us from uncertainty, whether domestic or external, and will bring about lasting benefits for society as a whole. 2 / 2 bis central bankers'speeches

firms still see their financial positions as weak, the overall financial positions of firms, including small ones, have continued to show signs of easing. the cpi ( excluding fresh food ) is declining on a year - on - year basis due to the substantial slack in the economy as a whole, but the decline leveled out in august 2009 and the moderating trend of decline has continued. the outlook for the trend change in prices is determined by the aggregate supply and demand balance and the medium - to long - term inflation expectations. it should be noted that, statistically, the year - on - year rate of change in the cpi will decline for a year due to the introduction of subsidies for high school tuition and other policy measures in fiscal 2010, but in assessing the trend change in prices, it is necessary to exclude such one - off factors. in terms of the trend change in prices, with medium - to long - term inflation expectations likely to be stable, the year - on - year rate of decline in the cpi ( excluding fresh food ) is expected to continue to moderate as the aggregate supply and demand balance improves gradually. while i have thus far explained the baseline scenario for economic activity and prices, the bank is also fully aware of the risks concerning such scenario. upside risks to the scenario are developments in emerging and commodity - exporting economies. the robust growth of emerging and commodity - exporting economies has driven the pick - up of japan ’ s economy. if the growth in those economies further accelerates, it will pose an upside risk to economic activity in japan. meanwhile, downside risks, although somewhat diminished, include the possible consequences of balance - sheet adjustments in the united states and europe as well as potential changes in firms ’ medium - to long - term growth expectations. moreover, attention should continue to be paid to various recent international financial developments and their effects. with regard to prices, there is a risk that inflation will rise more than expected in the event of a rise in commodity prices due to higher growth rates in emerging and commodity - exporting economies. on the other hand, there is also a risk that the rate of inflation might decline due, for example, to a decline in medium - to long - term inflation expectations. ii. conduct of monetary policy the bank recognizes that japan ’ s economy is faced with a critical challenge of overcoming deflation and returning to a sustainable growth path with price stability. therefore, the bank has been implementing various measures, taking into account the two factors that determine the