bank ’ s monetary easing policy. the government ’ s flexible management of fiscal policy, as well as its initiatives for structural reform to enhance growth potential, have contributed to the recovery, and the private sector ’ s initiatives for promoting innovation have played a big role in bringing the changes. that said, it is unquestionable that the bank ’ s unprecedented large - scale monetary easing measures, such as qqe and the subsequent “ qqe with a negative interest rate, ” have contributed significantly to the positive turnaround in japan ’ s economy. factors that hampered achieving 2 percent price stability target however, despite the bank ’ s large - scale monetary easing, the price stability target of 2 percent has not been achieved. i would like to point out three exogenous factors that seem to have had a negative impact : ( 1 ) substantial and sequential declines in crude oil prices since summer 2014 ; ( 2 ) weakness in demand, particularly in private consumption, following the consumption tax hike in april 2014 ; and ( 3 ) the slowdown in emerging economies from summer 2015 and volatile developments in global financial markets reflecting that situation. however, what is more important is the mechanism through which these exogenous factors hampered achieving the 2 percent target. a key factor here is inflation expectations ; that is, firms ’ and households ’ outlook for prices. to highlight the importance of inflation expectations, let me remind you about the transmission mechanisms of qqe. qqe aims to raise inflation expectations through the bank ’ s strong and clear commitment to achieving the price stability target of 2 percent and through large - scale monetary easing that underpins the commitment ( chart 3 ). at the same time, the bank exerts downward pressure on nominal interest rates across the entire yield curve through purchases of jgbs. these two channels together bring about a decline in real interest rates. this decline boosts firms ’ and households ’ economic activity, which in turn leads to higher inflation rates, supported by higher inflation expectations. as people actually experience inflation, inflation expectations will rise further. inflation expectations represent the core element of the mechanism of the bank ’ s monetary easing. against this backdrop, we have the dynamics of inflation expectations : how they have been increased by the bank ’ s policy and how the aforementioned three exogenous factors have hindered a rise in inflation expectations. this is the first issue to be analyzed in the comprehensive assessment. bis central bankers ’ speeches developments in inflation expectations let us take a look at the developments

public - sector investment. labor market conditions have improved somewhat on the whole. although the unemployment rate remains at a high level and employment growth is weak, overtime working hours have increased, and the ratio of job offers to job applications has continued its gradual rise. with respect to price developments, domestic wholesale prices ( adjusted for seasonal electricity rates ) seem to have stopped declining although downward pressures from competition with imports remain strong. this development was supported by the yen ’ s depreciation to date, the rise in crude oil prices and the improvement in domestic supply and demand conditions, particularly in construction - related goods. corporate service prices have declined, particularly in rents and leasing charges, but the year - to - year decrease has become smaller. consumer prices ( nationwide, excluding perishables ) have stayed slightly above the previous year ’ s level as commodity prices have continued to fall gradually and service prices have risen somewhat. growth in monetary aggregates, measured in terms of the year - to - year growth rate of m2 + cds average outstanding, has remained at 3. 0 - 4. 0 per cent, albeit with some fluctuations. regarding money market rates, the overnight call rate ( uncollateralized ) on the whole has stayed below the official discount rate of 0. 5 per cent. the 3 - month cd rate has moved at around 0. 5 per cent. meanwhile, with regard to the market ’ s interest rate expectations, 3 - month euro - yen futures declined at a somewhat brisk pace between the second half of july and autumn 1996, and have moved at around 0. 7 - 0. 9 per cent since september 1996. as the market ’ s expectations of higher interest rates receded, the long - term government bond yield has declined since mid - july 1996, and recorded a historical low of 2. 34 per cent in early december. recently, it has been moving at around 2. 4 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate was lowered by a total of 0. 8 percentage points in september, october, and december to reach a record low of 2. 5 per cent, reflecting developments in long - term market rates. in these circumstances, short - term and long - term average contracted interest rates on new loans and discounts have moved at record low levels. on the stock exchange, the nikkei 225 stock average had