negative real interest rates are not so uncommon. 4 i have no intention to try present a solution to the dispute, but i would say that in a situation where the economy is being affected by negative shocks or when deflationary factors remain strong, it is necessary and would not be abnormal for real interest rates to be negative. however, i do not think it normal for negative real interest rates to persist once the shocks and deflationary factors are resolved. with regard to japan, i have argued today that many of the shocks and deflationary factors have been resolved, and that, although the two major structural factors, shrinking population and globalization, persist, they may not be unsurmountable. they may not be unsurmountable, but can we actually surmount them? the road will surely be bumpy. however, more workers today are switching to companies that enhance productivity and raise wages. both firms and the government are pursuing strategies to adapt to the emerging structure of the international economy. if we continue to overcome the various challenges associated with a declining population and globalization in a creative manner, a future can be envisioned in which real interest rates will no longer be deeply negative. in conducting monetary policy, it is also necessary to pay close attention to short - term developments in economic activity, prices, and financial conditions. let us look at the recent ben bernanke, " why are interest rates so low, part 2 : secular stagnation " brookings commentary, march 2015. 4 lawrence summers, " on secular stagnation : larry summers responds to ben bernanke " brookings commentary, april 2015. developments in prices. the change in the consumer price index ( less fresh foods ) reached 4 percent in december 2022 and january 2023, due to the sharp rise in import prices and other factors, but has gradually decelerated since then. the main scenario the bank of japan envisages is that the inflation rate for the next two fiscal years ( april to march ) will be around 2 percent ( chart 9 ). on the other hand, inflation expectation has risen from below one percent to around one and half. the bank of japan aims to achieve the price stability target of 2 percent in a sustainable and stable manner. this target cannot be achieved unless the actual inflation rate declines as envisioned. at the same time, if inflation expectation does not rise toward 2 percent, the actual inflation rate will eventually fall below 2 percent, and it thus would not be possible to achieve

need to be drastically changed. in addition, if market participants'expectations diverge from the central bank's thinking, a market tantrum can occur in the process of resolving the expectation gap. it is therefore desirable to communicate in a way that prevents the excess growth of expectation gaps. furthermore, the effectiveness of monetary policy depends significantly on how widely and accurately the central bank's intentions are understood. therefore, it is essential to communicate the policy reaction function and views on the current economic condition so as to help people understand and form expectations about the future conduct of monetary policy. however, this does not mean that the outcome of each monetary policy meeting should be telegraphed in advance so that it can be fully priced in by the market. it is not possible to do so, as the outcome of a policy meeting fully depends on the discussion at the meeting. in addition, if market participants start to assume that each policy meeting will be preceded by communication intended to let them price in the decision in advance, then they will focus more on the language the bank uses than on the economic developments and outlook. such would not be desirable. thirdly, we would like to learn from our experience and improve our communication. the content is of course important, but there can be improvements in the manner of communication as well. for example, there were cases in the past where there were four speeches by board members in two weeks, and then none for a whole month. we would like to even out the timing of the speeches. also, if the bank announces the schedule of a speech at the last minute, it may be misunderstood as though the bank was about to give some urgent message. we intend to announce the schedule of speeches as soon as practicable. we will continue to explore better approaches, benefitting from suggestions from stakeholders and perhaps learning by trial and error. conclusion hokusai's great wave in july last year, the bank of japan issued a series of new banknotes. your cooperation has made it possible to achieve smooth distribution. i would like to express the bank's gratitude. the new 1, 000 - yen bill features katsushika hokusai's masterpiece kanagawa oki namiura ( chart 10 ). there is no consensus yet, but many argue that it depicts the scenery seen somewhere off yokohama port. this means that, if we transpose the scenery to a contemporary setting, we may be able to see this meeting venue beyond the waves. this woodprint