of long - term inflation expectations under “ missing inflation. ” in fact, a good number of advanced economies have experienced very sluggish price developments in spite of significant improvements in economic activity. this raises concerns over the credibility of inflation targets, since central banks ’ track record in hitting their target provides the foundation for the credibility of such targets. japan ’ s experience shows that it is difficult to re - anchor long - term inflation expectations from inflation below the target level. that suggests the importance of maintaining well - anchored inflation expectations. at the same time, if missing inflation comes from structural factors such as globalization and digitalization, central banks should continue examining how best to manage inflation expectations, while securing stability in economic and financial conditions, within the flexible inflation targeting framework. b. monetary policy instruments regarding the monetary policy instruments, under normal circumstances, central banks pursue their mandate by adjusting short - term nominal interest rates. however, following the global financial crisis, central banks have been forced to find alternatives – policy instruments that are often labeled as unconventional such as forward guidance and the active use of the size and composition of their balance sheet – to overcome the effective lower bound on nominal interest rates. the recent experience with regard to unconventional policy shows that such new tools are effective to counter massive adverse shocks even after hitting the effective lower bound. at the same time, our understanding of unconventional monetary policy is limited. in fact, while policy makers have developed a wide range of unconventional policy tools, their effectiveness and transmission mechanisms may differ depending on see, for example, powell ( 2018b ). financial conditions and economic structure. it is also important to explore how central banks should use those unconventional policy tools in the future. in that regard, an interesting question is : will those unconventional policy tools become conventional policy tools in normal times? c. the relationship between price stability and financial stability regarding the relationship between price stability and financial stability, it is increasingly recognized that the prolonged low interest rate environment raises two major issues. the first issue is that continued low interest rates can change the risk - taking behavior of financial institutions and affect financial stability. along this line, two types of risks have been pointed out. the first is that low interest rates lead banks to take excessive risks, and the second is that any further cuts in policy interest rate beyond a “ reversal interest rate ” discourage risk - taking by banks. while empirical studies on this issue have been accumulating, they are not conclusive about the nature of risks including their probability distribution.

, substantially above the level of required reserves, has kept very short - term interest rates practically at zero percent, with some minor fluctuations if any. considering that the effects of the quantitative easing policy are coinciding with the effects of short - term interest rates being at practically zero percent, a change of the policy framework itself does not imply any major change in the policy effect. if the trend toward positive year - on - year growth in the cpi becomes firmly established, real short - term interest rates will effectively decline, providing powerful stimulus to economic activity and prices. the level and the time - path of interest rates under the subsequent two processes will certainly depend on economic activity and price developments. if it is judged that upward pressure on prices continues to be contained and the economy follows a sustainable and balanced growth path, this is likely to give the bank latitude in conducting monetary policy. the bank conducts monetary policy to realize the sustainable growth of the japanese economy under price stability. at present, the economic recovery is continuing and the environment influencing prices is beginning to change. if the year - on - year rate of change in the cpi registers zero percent or higher on a sustainable basis, that will mark a sort of milestone toward realizing such a goal. the bank will continue to conduct monetary policy appropriately in accordance with the changes in economic and price conditions to provide support from the financial side for the good performance of the japanese economy over the long term. appropriate monetary policy is also important from the perspective of financial market stability. for example, long - term interest rates have remained stable in the united states in part because of market confidence that the appropriate conduct of monetary policy by the federal reserve will maintain price stability into the future. in japan as well, as noted in the outlook report, together with the maintenance of appropriate monetary policy, the bank's explanation of its thinking on the conduct of monetary policy in detail will contribute to smooth formation of prices in financial markets. closing remarks chubu is a region that has taken advantage of its manufacturing strengths, vigorously developed private - sector business activities, and pulled the japanese economy forward. such originality and inventiveness based on private - sector initiatives will be of the utmost importance for the japanese economy to realize sustainable growth. in that sense, i look forward to the further remarkable development of the chubu region.