persistent pressure and some firms might have to shift their businesses overseas if electricity costs – including the imports of alternative energy sources – increase. fourth, protracted deflationary expectations. in august 2011, the base year for calculating the cpi was switched from 2005 to 2010, and as a result the year - on - year rate of change in the cpi components ( all items less fresh food ) was revised downward by 0. 5 to 0. 8 percentage point. the year - on - year rate of change in the new 2010 - base cpi ( all items less fresh food ) was minus 0. 2 percent in april, minus 0. 1 percent in may, minus 0. 2 percent in june, and 0. 1 percent in july. private research institutes had originally forecasted that the year - on - year rate of change in the cpi ( all items less fresh food ), because of the change in bis central bankers ’ speeches the base year, would decline from the recent level of around 0. 6 percent to around 0 percent. the bank ’ s forecasts were almost within the same range, and it has been confirmed that it will still take some time to achieve price stability. if expectations for the continuation of the zero interest rate become protracted in a situation where more time is needed to achieve price stability, there is a risk that people ’ s deflationary expectations will intensify in a self - fulfilling manner. if by any chance deflationary expectations prevail, it will become difficult to change the behavior of people who are reluctant to take risks ; people might postpone spending, and growth expectations would be unlikely to increase. there is a risk that the economy will be unable to escape from such a situation, which might be called a “ deflation and low - growth trap. ” at present, even following the change in the base year, it is still the case that the economy is emerging from deflation amid the narrowing output gap, and careful attention should be paid to any possible changes in people ’ s inflation expectations. in this regard, there are factors, including an incremental rise in commodity prices, that will push up the actual price trend with a lag. from october 2011 onward, the effects stemming from a rise in tobacco tax and an increase in non - life insurance rates will disappear. due attention should be paid to whether these factors will again put downward pressure on the cpi. in the meantime, at the monetary policy meeting held on august 4, the bank

haruhiko kuroda : the bank's semiannual report on currency and monetary control statement by mr haruhiko kuroda, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 22 november 2016. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. i am pleased to have this opportunity today to talk about developments in japan ’ s economy and present an overall review of the bank ’ s conduct of monetary policy. i. economic and financial developments in japan at the monetary policy meeting ( mpm ) held on november 1, the bank released the outlook for economic activity and prices ( outlook report ), which presents its projections for japan ’ s economic activity and prices through fiscal 2018. based on this, i will first explain economic and financial developments in japan. japan ’ s economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies. with regard to the outlook, it is likely to continue growing at a pace above its potential through the projection period — that is, through fiscal 2018 — with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and the effects of the government ’ s large - scale stimulus measures, as well as the recovery in overseas economies. on the price front, the year - on - year rate of change in the consumer price index ( cpi, all items less fresh food ) has been slightly negative due to the effects of the decline in energy prices. as for the outlook, it is likely to be slightly negative or about 0 percent for the time being, and as the aggregate supply and demand balance ( the output gap ) improves and medium - to long - term inflation expectations rise, it is expected to increase toward 2 percent — the price stability target — in the second half of the projection period. the timing of the year - on - year rate of change in the cpi reaching around 2 percent will likely be at the end of the projection period — that is, around fiscal 2018. thus, the momentum toward achieving the price stability target of 2 percent seems to be maintained. however, it is somewhat weaker than the previous outlook made in the july outlook report, and thus developments in prices warrant careful attention going forward. ii. conduct of monetary