- term inflation expectations appear to be rising on the whole from a somewhat longer - term perspective, they have weakened recently. the results of various surveys on inflation expectations as well as developments in break - even inflation ( bei ) rates – calculated using the yields of inflation - indexed japanese government bonds ( jgbs ) – imply that inflation expectations have been declining since end - 2015. nevertheless, when assessing developments in inflation expectations, it is necessary to also take account of firms ’ price - and wage - setting stance and households ’ spending behavior. in particular, wage developments warrant attention. past experience shows that wages and prices move roughly in tandem, so a sustainable rise in prices is unlikely to be achieved without an increase in wages. as mentioned earlier, in the annual labor - management wage negotiations this spring, a rise in base pay was agreed for the third year in a row. moreover, wage increases have been spreading to small firms. therefore, the mechanism in which inflation rises moderately accompanied by wage increases has been operating. consequently, as actual inflation rises, medium - to long - term inflation expectations are likely to follow an increasing trend and gradually converge to around 2 percent – the price stability target. against this backdrop, firms ’ wage - and price - setting stance is likely to shift further toward raising wages and prices. bis central bankers ’ speeches taking a closer look at the results of the annual labor - management wage negotiations this spring, however, the rise in base pay was somewhat less than that of last year, particularly in large firms, partly because confidence on the side of both labor and management was affected by the heightened uncertainty regarding developments in overseas economies and by the volatility in financial markets since the turn of the year. the bank will assess carefully how firms ’ price - setting stance develops this fiscal year, given the results of the annual labormanagement wage negotiations. in sum, the underlying trend in inflation is projected to continue improving steadily as the output gap is expected to move into positive territory and gradually increase further and as medium - to long - term inflation expectations will follow an increasing trend. therefore, the year - on - year rate of change in the cpi for all items less fresh food is likely to be about 0 percent for the time being, but the rate of change is projected to accelerate toward 2 percent as the effects of the decline in energy prices dissipate. the bank ’ s april 2016 outlook report – taking into consideration oil prices in the futures market, which reflect forecasts by market participants

makoto's personal assessment. crisis ( gfc ), and it is currently experiencing a major depression caused by the novel coronavirus ( covid - 19 ) pandemic. although monetary policies in japan remained accommodative almost throughout, the economy did not decisively overcome economic stagnation and deflation. one reason that monetary easing was unable to stimulate sufficient demand is that the money stock did not rise enough relative to the monetary base ( i. e., the money multiplier fell ), due in part to the decline in the functioning of credit intermediation, especially during the crisis of japan's financial system in the late 1990s. furthermore, since the money demand function became unstable with growth expectations declining as deflationary sentiment took hold and interest rates approaching the zero lower bound, the effectiveness of accommodative monetary policies may have declined accordingly. thus, it is likely that accommodative monetary policies that would have been quite powerful based on conventional standards had a much smaller effect than expected. this raises the question whether the scale of monetary easing was sufficient. iii. monetary policy under globalization the main objectives of monetary policy can be summarized as ( domestic ) price stability and sound development of the national economy, such as maximizing employment or maintaining an appropriate balance of supply and demand. central banks conduct monetary policy to achieve these goals in line with the particular conditions of their domestic economy. however, in a globalized world economy, monetary policies in one country are inevitably affected by the economic conditions and monetary policies of other countries. the transition from a fixed to a floating exchange rate system in the 1970s and the subsequent advances in globalization have meant that macroeconomic policies, including monetary policies, and their effectiveness must be considered within the framework of international finance ( open macroeconomics ). the move to a floating exchange rate system has led to the so - called " trilemma of international finance, " which is summarized in table 1. table 1 : the trilemma of international finance regime monetary policy international capital flows exchange rate fixed exchange rate similar regulated fixed similar ( due to similar economic trends ) stable flows stable independent free flows variable floating exchange rate the trilemma of international finance refers to the fact that economies cannot maintain ( 1 ) a fixed exchange rate, ( 2 ) independent monetary policy, and ( 3 ) free international capital flows all at the same time. one of the three must be relinquished. giving up ( 1 ) results in a floating exchange