and stable achievement of the price stability target, accompanied by wage increases, comes in sight. what would happen if an exit from the large - scale monetary easing starts in the future? what then would happen if the virtuous cycle between wages and prices were to finally take hold, and, as a result, sustainable and stable achievement of the price stability target were to come in sight? a question that is often posed is whether this new phase would trigger a variety of additional problems. some argue as follows. realizing such economic conditions has been a long - standing goal of the country and should be considered as a positive development in itself, but, if this happens, the bank will likely gradually revise the large - scale monetary easing it has implemented to date. modification of monetary policy will naturally have some effects on consumption and investment, but would that be the only impact? given that very strong monetary easing has been continued for an extended period of time, could an exit from it go without exerting novel stresses on the household sector, the corporate sector, or financial institutions? these are complex questions that need to be considered from various perspectives. in addition, the outcome of an exit would significantly depend on the specific condition at the time and on the way monetary policy is modified. thus, there would be no easy or simple way to predict the outcome. today, i would like to offer one perspective by looking at what happened to net interest income for relevant sectors in the past transition from a state with positive interest rates to a state without them. interest rates may not necessarily return to past levels in the first place, and of course, the opposite would not necessarily happen in the reverse process. this perspective therefore would fall short of providing an answer but may shed some light on the questions. the government's annual report on the japanese economy and public finance this year includes an analysis of how changes in interest rates thus far have affected interest receipts, interest payments, and net interest income for various economic agents ( chart 8 ). net interest income is the difference between each entity's financial assets multiplied by the rate for interest received and the balance of borrowings and other financial liabilities multiplied by the rate for interest paid. looking at households, while interest rates on deposits and other assets they held declined first, interest rates on mortgages and other borrowings followed suit. however, since households overall have a larger amount of deposits than mortgage liabilities, net interest income has deteriorated on a scale of trillions of yen compared

reports can be interpreted as showing a polarization between those who combine stages 2, 3, and 4 - - wage hikes, the pass - through of higher labor costs, and the shift to higher - value products and services - - and those who keep the past strategies. oita prefecture is renowned for its hot springs and ranked first in a survey on tourist satisfaction for fiscal year 2022. i am curious to hear what was the key to enhancing tourist satisfaction. i asked some branch managers at the meeting how widespread such strategies of increasing the value of products and services, raising wages, and securing human resources were. they responded that, while some firms had started to report that they have taken such approaches, many seemed to be determined to weather labor shortages without raising their break - even point so that they could survive the next wave. branch managers also argued that, as the competition remained fierce, many firms were making pricing decisions mainly with an eye on other competitors. therefore, the possibility cannot be ruled out that, after stage 1 - - the pass - through of higher import prices, which triggered price rises - - subsides, stages 2, 3, and 4 might also fade away. on the other hand, it also might be that once a firm reaches stage 4, reverting to the former state of affairs may become less likely, at least for the firm in question. future developments in demand - - in other words, how consumption, investment, and exports will develop - - will also have a major impact on the outlook. what statistics tell us on the relationship between firms'price - setting behavior and inflation so far, i have focused on what we have heard from specific firms. i believe that firm - by - firm stories are essential in grasping what is happening, particularly at the turning point of a structural development. individual stories, however, cannot capture the overall trends. fukuzawa once argued that one should not speculate on the nationwide trends by just looking at specific cases, and he emphasized the importance of statistics. let us now turn to statistical data. to tell you my conclusion first, solid progress is observed in the transformation of firms'wage - and price - setting behavior. an analysis by the bank's staff shows that the effect of higher prices feeding into wages, or the stage 2 effect, using my term, was statistically significant in the first half of the 1990s, then became much less clear in the 2010s, but has become significant again in the recent period (