its jgb purchases so that it would more than double. in this way, the bank decided to introduce a new phase of monetary easing both in terms of quantity and quality. continuation of monetary easing in addition, with regard to the future policy stance, the bank clearly stated that it would continue with the qqe as long as it is necessary for maintaining the target of 2 percent in a stable manner. while the bank ’ s commitment is to achieve a 2 percent inflation rate at the earliest possible time, this does not mean that a temporary achievement of this rate is sufficient. it is important to maintain the 2 percent target in a stable manner. to this end, it is necessary for not only the observed inflation rate but also medium - to long - term inflation expectations to be about 2 percent. if the observed inflation rate hovers around 2 percent on average and firms and households act on the assumption that prices will increase by about 2 percent, this will lead to price stability in the medium to long term. to use the metaphor of the anchor, the aim is to set the 2 percent anchor deeply in people ’ s understanding and bis central bankers ’ speeches make the observed inflation rate hover around the anchor. in terms of the phillips curve, this means that when the economy is in an average state – when the output gap is zero – the 2 percent inflation rate will be achieved. this is what the bank means when it says “ maintain 2 percent in a stable manner. ” the bank will continue with the qqe as long as it is necessary to achieve such a state while assessing the trend developments in inflation. if i may hasten to add one point, to this end it becomes more necessary than ever to gauge inflation expectations as accurately as possible. however, inflation expectations are intrinsically difficult to measure. they are not directly observable, and there are a variety of inflation expectations depending on who is forecasting what type of prices. with this in mind, the bank has been carefully analyzing a number of indicators of inflation expectations, such as the break - even inflation rate using inflation - linked bonds as well as various surveys conducted on households, economists, and market participants, and doing its utmost to gauge accurately the changes in people ’ s inflation expectations. the bank will continue to improve the accuracy of its judgment by thoroughly examining a wide range of data, including firms ’ inflation expectations, which are scheduled to be added to the tankan ( shortterm economic survey of enterprises in japan ) survey

let me touch on the main features of the current economic recovery. this recovery has been following a pattern that differs from typical ones in the past. in many cases, the pattern of postwar economic recovery in japan was that it started with improvement of corporate profits due to an increase in exports and production, which in turn led to an increase in business fixed investment. the longest postwar economic recovery – from 2002 to 2008 – also followed this pattern, on the back of an unprecedented expansion in the global economy, with the rise of emerging economies and housing bubbles in advanced economies. in this type of pattern, large enterprises in the manufacturing sector – which have an advantage in exports – are the first to recover and, as the employment and income situation improves on the whole, a recovery spreads gradually to the nonmanufacturing sector and small enterprises. however, this time the major feature of the recovery is that the nonmanufacturing sector has been leading it on the back of firm domestic demand, such as private consumption and public investment. therefore, business fixed investment is weak in the manufacturing sector but strong in the nonmanufacturing sector. the indices of tertiary industry activity, which show developments in the nonmanufacturing sector, have recovered close to a level prior to the lehman shock, while the indices of industrial production have remained at about 80 percent of their peak prior to the lehman shock ( chart 5 ). taking into account the difference in recovery pattern, how should we view the sustainability of economic recovery in the future? what is important is, first, for the firmness in domestic demand to continue and, second, for exports, production, and business fixed investment in the manufacturing sector – which are lagging – to improve. in regard to the first point, as mentioned earlier, a virtuous cycle from income to spending has started to steadily operate, and thus firm domestic demand is likely to be sustained. let me next touch on the second point. the key here is, above all, developments in overseas economies. current state of and outlook for overseas economies overseas economies as a whole are gradually heading toward a pick - up, although a somewhat weak performance is partly seen. the economies are expected to gradually pick up mainly as the u. s. economy moderately accelerates its pace of recovery and the european economy slowly bottoms out. by region, the u. s. economy has been on a moderate recovery trend against the background of steady private demand. five years have passed since the lehman shock