a ) our basic thinking regarding price stability ; ( b ) the measurement of prices, namely, issues regarding price indexes ; ( c ) the evaluation of recent price developments in japan ; and ( d ) issues related to the numerical quantification of price stability. since i have often been asked about the relationship between this comprehensive study on price stability and the lifting of the zero interest rate policy, let me say a few words on this issue. the comprehensive study that we have undertaken is intended to review our basic thinking regarding price stability with a view to enhancing the transparency of monetary policy over the long run. and it should be understood that it is independent from the current conduct of monetary policy. hence, it is not directly related to such issues as the timing of lifting the zero interest rate policy or conditions which must be fulfilled for lifting such policy. in other words, it does not imply that the zero interest rate policy will not be lifted until the study is completed nor that it will be lifted once the study is completed. conditions for lifting the zero interest rate policy can be likened to those for a patient in a hospital coming out of the intensive care unit, while our basic study on price stability is similar to a medical study of how to maintain health and physical strength in normal times. with respect to the condition for lifting the zero interest rate policy, we have clearly stated that we will maintain the current zero interest rate policy until deflationary concerns are dispelled. 4. concluding remarks : until deflationary concerns are dispelled i would like to conclude my remarks today by addressing the question of how we might decide that the economy has reached a stage where deflationary concerns have been dispelled. what is of central concern in our conduct of monetary policy is to avoid a deflationary spiral, which is a vicious circle of price declines and recession. however, it is difficult to define this spiral by such simple figures as a certain percentage decline in cpi. to reiterate, we cannot necessarily conclude that a situation is deflationary solely from a negative inflation rate when the it and distribution network revolutions are in full swing. to the contrary, even if inflation is level statistically, stagnant demand would indicate future declines in prices and corporate profits, which means that deflationary concerns have yet to be dispelled. thus, price developments must be assessed together with underlying factors. furthermore, the most important point when judging whether deflationary concerns are dispelled is to

industrial countries have now discarded the idea that a little bit of inflation will improve economic activity. mainstream thinking now says that price stability should be maintained by a policy which prevents inflation from arising in the first place. problems with further monetary easing the third point concerns measures to create inflation. in japan, we have already exhausted orthodox monetary easing measures. even if we wanted to create very modest inflation, we would have to resort to such unorthodox measures as an increase in our purchase of government bonds or even underwriting them. but here it should be noted that there is a risk that the negative side effects might be quite large once the bank implemented such unorthodox measures. the severity of japan ’ s fiscal situation has attracted attention from all over the world. thus, if the bank of japan started purchasing government bonds in large quantities, credibility in them would most likely be impaired. long - term interest rates would rise because of a higher risk premium occasioned by a deterioration in the creditworthiness of the japanese government. adoption of such a drastic policy would run the high risk of eroding not only fiscal discipline and the smooth functioning of financial markets but also the credibility of japan itself. effects of the zero interest rate policy having said all this, we should ask ourselves whether there is anything more to do in terms of monetary policy. as a matter of fact, the zero interest rate policy is an extremely powerful policy tool for monetary easing. under the framework that the zero interest rate policy will be maintained until deflationary concerns are dispelled, if uncertainty about the economic outlook increases, the timing of lifting the zero interest rate policy will be automatically delayed. by taking account of this automatic prolongation of current monetary policy, long - term interest rates will promptly decline. thus, the zero interest rate policy is powerful in that it possesses flexibility of automatically absorbing, to a certain extent, the effects of any negative shock on the economy. currently, japan ’ s economy has started to improve. industrial production continues to rise, and the increase in corporate profits is being confirmed. though there remains uncertainty regarding the future, we have been observing quite a number of new developments in such areas as information and telecommunications. at this juncture, i believe it very important to promote structural reform and create an environment conducive to revitalizing the corporate sector while the economy is underpinned by fiscal and monetary policy. 3. inflation targeting original inflation targeting next, let me talk about the original concept of