. an important element in the growth outlook is macroeconomic stability, which is where monetary policy makes its contribution. 4. the role of monetary policy the mandate of the bank is to achieve low inflation in the interest of sustainable economic growth and development. a low inflation environment contributes to growth and development by providing a more certain basis for investment decisions in the economy, and lowering overall risk. the inflation - targeting framework adopted in february 2000 has contributed to the reduction of inflation to low levels. for the past 32 months, cpix inflation ( i. e. headline inflation excluding mortgage interest cost ) has remained within the target range of 3 - 6 per cent, despite strong output and expenditure growth in the economy, and significantly higher international oil prices. furthermore, there is evidence that inflation expectations have become entrenched at levels consistent with the target. these developments have allowed for nominal interest rates to fall to levels last seen in the late 1970s. between june 2003 and april 2005, the repo rate was reduced by a total of 650 basis points, although at the most recent monetary policy committee meeting earlier this month, the repo rate was raised by 50 basis points to 7, 5 per cent per annum. real interest rates have also come down somewhat and have become less variable. the recent repo rate increase, the first since september 2002, was motivated by the deteriorating risks to the inflation outlook. apart from adverse oil price developments, the concerns of the committee also centred around the continuing high levels of consumer demand, which have been reflected in rising levels of credit extension to the private sector and also the larger - than - usual current account deficit on / of the balance of payments. twelve - month growth in bank loans and advances extended to the private sector measured 23, 1 per cent in april compared to 24, 3 per cent in march, while asset - backed credit extended to the private sector continued to grow strongly at a year - on - year rate of 27, 2 per cent in april. although there were few signs of inflationary consequences at that stage, the impact was being felt in the deficit on the current account of the balance of payments which had expanded to 6, 4 per cent of gdp by the first quarter of this year. as we observed in our latest monetary policy review, current account deficits are a reflection of higher domestic expenditure and are not in themselves inflationary. there is however a possible risk to the exchange rate if the deficits are perceived to be unsustainable, particularly if the

haruhiko kuroda : the bank's semiannual report on currency and monetary control statement by mr haruhiko kuroda, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 22 november 2016. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. i am pleased to have this opportunity today to talk about developments in japan ’ s economy and present an overall review of the bank ’ s conduct of monetary policy. i. economic and financial developments in japan at the monetary policy meeting ( mpm ) held on november 1, the bank released the outlook for economic activity and prices ( outlook report ), which presents its projections for japan ’ s economic activity and prices through fiscal 2018. based on this, i will first explain economic and financial developments in japan. japan ’ s economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies. with regard to the outlook, it is likely to continue growing at a pace above its potential through the projection period — that is, through fiscal 2018 — with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and the effects of the government ’ s large - scale stimulus measures, as well as the recovery in overseas economies. on the price front, the year - on - year rate of change in the consumer price index ( cpi, all items less fresh food ) has been slightly negative due to the effects of the decline in energy prices. as for the outlook, it is likely to be slightly negative or about 0 percent for the time being, and as the aggregate supply and demand balance ( the output gap ) improves and medium - to long - term inflation expectations rise, it is expected to increase toward 2 percent — the price stability target — in the second half of the projection period. the timing of the year - on - year rate of change in the cpi reaching around 2 percent will likely be at the end of the projection period — that is, around fiscal 2018. thus, the momentum toward achieving the price stability target of 2 percent seems to be maintained. however, it is somewhat weaker than the previous outlook made in the july outlook report, and thus developments in prices warrant careful attention going forward. ii. conduct of monetary