that, what i think is important is to create and maintain a virtuous cycle in which the inflation rate rises, albeit gradually, along with an increase in nominal wages. in this connection, i think that, even in a situation where wages and prices increase in a balanced manner over time, given that other advanced economies are currently on a disinflationary trend, japan ’ s inflation rate may still be susceptible to downward pressure. 1 iii. monetary policy the bank introduced qqe in april 2013, with a view to achieving the price stability target of 2 percent in terms of the year - on - year rate of change in the cpi at the earliest possible time, with a time horizon of about two years. in this policy, the main operating target for money market operations was changed from the uncollateralized overnight call rate to the monetary base, and it was decided that the bank would aim to double the monetary base in two years. in doing so, it would purchase massive amounts of japanese government bonds ( jgbs ), for historical developments in japan ’ s inflation rate and a comparison with other major economies, see “ recent developments in economic activity and prices, and future monetary policy ”, a speech by takahide kiuchi at a meeting with business leaders in kanagawa on february 28, 2013, available on the bank ’ s web site ( http : / / www. boj. or. jp / en / announcements / press / koen _ 2013 / ko130319a. htm / ). bis central bankers ’ speeches with all maturities made eligible for purchases. in addition, in aiming to achieve the price stability target of 2 percent, the bank made a commitment that it would continue with qqe as long as it is necessary for maintaining the target in a stable manner. so far, qqe has exerted positive effects on japan ’ s economy through a positive influence on the expectations of financial markets and of firms and households. since the introduction of the policy in april, however, while supporting the concrete measures of qqe, i have continued to propose changing the expression in the statement on monetary policy regarding the time frame for achieving the 2 percent price stability target and for continuing with qqe, although my proposal has been repeatedly defeated by a majority vote during the mpms. let me explain the intention of my proposal as well as my personal views on some points of discussion regarding the conduct of monetary policy. a.

likely to reach around 2 percent – the price stability target ” to a new expression that “ the rate of increase in the cpi is expected to rise moderately ”. second, with regard to inflation expectations, i proposed changing the current expression that inflation expectations “ are likely to continue on a rising trend under quantitative and qualitative monetary easing ( qqe ), partly supported by a rise in the observed inflation rate, gradually converging to around 2 percent – the price stability target ” to a new expression that they “ are likely to continue on a moderate rising trend, partly supported by a rise in the observed inflation rate ”. in achieving the price stability target, it is important to create a virtuous cycle in which the inflation rate gradually rises as the economy as a whole grows in a sustainable manner and as people ’ s standards of living improve. from such a viewpoint, i personally consider that it is neither easy nor appropriate to aim at achieving a price stability target of 2 percent in a short time frame of about two years. the recent rise in prices is partly attributed to some strength in demand, but so far it has largely been attributed to other factors such as increases in energy prices and the effects of changes in foreign exchange rates. in order to achieve sustainable price increases together with economic improvement, a rise in wages – especially employees ’ scheduled cash earnings – is considered to be the key. it is most likely that some firms will raise wages including base salaries in the upcoming spring wage negotiations and that the average rate of wage increase will rise to some extent. however, in order for an increasing number of firms to significantly raise base salaries and for prices to be on an uptrend as a result, supply and demand conditions in the labor market must improve further through a heightening of growth expectations. since developments in employment and wages tend to lag behind economic growth, my view is that a considerable time lag is to be expected until the inflation rate rises together with the wage increase. for example, under an assumption that the real wage growth rate equals the labor productivity growth rate, if the labor productivity growth rate is about 1 percent, the nominal wage growth rate – consistent with the price stability target of 2 percent – should reach about 3 percent, and by the same token, if the labor productivity growth rate is about 0. 5 percent, the nominal wage growth rate should rise to about 2. 5 percent. to attain such a level of growth in nominal wages will take considerable time. having said