message of commitment by the central bank to a specific interest rate level. in this respect, i understand that fixed - rate purchases are nothing more than an emergency tool. i believe that flexibly and moderately adjusting the targets in accordance with market conditions is prudent policy management even if this approach may be considered behind the curve. in my view, the yield curve that would be most appropriate for achieving favorable conditions in economic activity and prices should be a little steeper. if the yield curve becomes excessively flat and expectations of a continued interest rate decline become predominant, firms and households increasingly tend to defer procurement of funds, which in turn leads to postponement of investment and consumption - - in other words, demand is prone to be deferred. in this respect, a slightly steeper yield curve is rather beneficial for stimulating sound economic activity and is also likely to contribute to enhancing the sustainability of the social security system, thereby stabilizing people's sentiment. as for the negative impact of steepening, i presume that it barely dampens business fixed investment at the macro level because economic entities other than the government that procure funds in the very long term - - a period of 20 to 30 years - - are limited to firms whose cash flow is abundant and stable from the outset. b. a shift from targeting the monetary base to targeting interest rates one of the key points of the policy shift from qqe with a negative interest rate to qqe with yield curve control is that the operating target for money market operations changed from the monetary base to interest rates, a traditional target. in this respect, the guideline for the bank's annual jgb purchases of about 80 trillion yen, which was the pillar of the initiative to increase its monetary base, has become an approximate guideline that is not strongly binding for the guideline for money market operations. consequently, i believe that the purchasing of treasury discount bills, which has been conducted as a complementary measure in preparation for the possibility of failing to reach the monetary base target through purchases of jgbs, is essentially unnecessary. i consider it desirable to further reduce the amount outstanding of holdings of treasury discount bills while paying close attention to the impact on the money market. even so, it is necessary to continue purchasing a certain amount of jgbs as a precondition for long - term interest rate control regardless of whether or not the annual purchase amount should be about 80 trillion yen. as for the impact of continued purchases of

the outlook for economic activity and prices ( hereafter the outlook report ). as a result of the revision to seasonal adjustments carried out in april 2010, it is likely that a portion of the significant drops in production in the october - december quarter of 2008 and the january - march quarter of 2009 is recognized as seasonal rather than actual movement. such a seasonal adjustment method would push up future growth rates for the october - december and january - march quarters, but push down those for the april - june and july - september quarters. therefore, it is necessary to assess actual terms for the apriljune and july - september quarters by adjusting for such downward pressure. bis central bankers ’ speeches starting with the outlook for the economy, the pace of recovery is likely to slow temporarily in the second half of fiscal 2010 due to factors such as the slowdown in overseas economies and the ending of the boost from policy measures targeted at durable consumer goods, as well as the recent appreciation of the yen. the growth rate of the economy for the october – december quarter of 2010, in particular, is highly likely to turn out negative following the higher - than - expected growth in the july – september quarter. however, although the effects of the appreciation of the yen may continue to linger, the economy is expected to return to a moderate recovery path once we enter fiscal 2011, given that – with growth in overseas economies expected to pick up again – exports are projected to continue increasing and firms ’ sense of excessive capital stock and labor is likely to dissipate gradually. in fiscal 2012, japan ’ s economy is expected to continue growing at a pace above its potential amid the continued relatively high growth in overseas economies, especially emerging and commodity - exporting economies. although my view regarding the outlook is basically in line with the bank ’ s projection, i am concerned about the extent to which japan ’ s economy will be able to benefit from global economic growth. in fact, i have a growing sense that japan has not yet enjoyed much success in this regard, given that the pace of growth in japan ’ s exports has been more moderate than that of other countries since the mid - 1990s and that japan ’ s share in world exports has been declining since the mid - 1990s despite trade liberalization in countries such as china. moreover, japan is likely to face an even tougher global competitive environment due not only to the recent rapid appreciation of the yen – in a situation where domestic capacity is yet underutilized – but also to factors unrelated to