. according to the projections in the recently released outlook for economic activity and prices ( outlook report ), real gdp is expected to grow by 1. 1 percent in fiscal 2014, 1. 5 percent in fiscal 2015, and 1. 3 percent in fiscal 2016 ( chart 2 ). with regard to the outlook for the cpi excluding fresh food, the year - on - year rate of increase after eliminating the direct impacts of the consumption tax hikes is likely to be around 1¼ percent for some time. the reason is that upward pressure from import prices – mainly from energy prices – will wane through around summer while trend inflationary pressure – due mainly to an improvement in the output gap – will increase, and these two factors will likely more or less offset each other. subsequently, as trend inflationary pressure continues to grow, the year - on - year rate of increase is expected to follow a rising trend again from the second half of this fiscal year, and reach around 2 percent around the middle of the projection period, which is from fiscal 2014 through fiscal 2016. thereafter, the rate of increase is likely to edge up as medium - to long - term inflation expectations will converge to bis central bankers ’ speeches around 2 percent and the output gap is expected to continue expanding in positive territory. according to the outlook report, the year - on - year rate of change is expected to be plus 1. 3 percent in fiscal 2014, plus 1. 9 percent in fiscal 2015, and plus 2. 1 percent in fiscal 2016 ( chart 2 ). hence, japan ’ s economy is likely to achieve an inflation rate of around 2 percent, and thereafter gradually shift to a growth path that sustains such inflation in a stable manner. ii. issues regarding the outlook for economic activity let me next talk about issues concerning the outlook for the real economy and prices – specifically, two concerning the real economy and two concerning prices. effects of the consumption tax hike and the sustainability of domestic private demand with regard to the real economy, the first issue – and perhaps the one of immediate interest for you – is the effects of the consumption tax hike. the front - loading of demand prior to the tax hike through the end of march was quite substantial ( chart 3 ). when the consumption tax was last raised in april 1997, the economy subsequently fell into recession. there are some concerns that this might happen again. however, looking back at the economic situation at the time, following the decline in demand after the tax hike, the economy showed

clear and specific pledge aimed at actual cpi data made public each month, and not the prospect of it. i would like to emphasize this point, although i am aware that it has been stated explicitly on several occasions in the past. as i have explained, the bank's commitment to easy monetary policy is unequivocal. however, the role of financial markets in delivering its commitment effect through the entire economy is equally great and not to be discounted. a key factor behind their role, i believe, is the " price discovery function. " in other words, the determination of market prices and interest rates at levels that reflect the degree of relevant risks is the most important premise for the efficient distribution of funds required by firms and households. further refinement of the price discovery function through development of innovative transactional techniques in an environment of enhanced market liquidity should lead to more efficient funds allocation and, hopefully, more active investment by the private sector. in this connection, markets for new securitization products such as asset - backed securities ( abss ) have grown in recent years. i strongly hope that securities firms, the main players in the securities market, and other relevant institutions will continue to utilize their ingenuity in developing new and innovative financial instruments that will further invigorate financial markets. the bank, for its part, has recently started purchasing abss to help support this market. it is unprecedented for a central bank to directly accept the credit risk pertaining to private - sector debt, and this is, therefore, a move that we hope will act as a " catalyst " for the autonomous development of the abs market. next, i would like to turn to japan's financial system, which, though still under serious strain, appears to be gradually improving its soundness. nonperforming loans ( npls ) held by financial institutions as a whole remain the most crucial issue. the economic value of loans is being appropriately evaluated. and based on this evaluation, appropriate provisioning and write - offs are being promoted. currently, efforts are being made to enhance concerted action by both the financial and industrial communities. it is notable that parties concerned are becoming increasingly aware of the necessity to utilize corporate managerial resources in achieving structural reforms, rather than wastefully abandoning them. while the work of the industrial revitalization corporation, a public entity, is getting into full swing, unassisted and voluntary actions on the part of the private sector are also growing more widespread. moreover,