demand peaks out, but if exports remain sluggish, a virtuous circle may not take hold. for this reason, overseas economic developments warrant close attention. next, risks stemming from domestic factors include uncertainty with regard to reconstruction - related demand as well as both upside and downside risks in how medium - to long - term growth expectations will be affected by the supply and demand balance of electricity and by innovation in energy - related technology. another issue is the sustainability of japan ’ s public finances, concerns over which restrain consumer spending due to anxiety about the future and affect long - term interest rates. given that social security spending will continue to exert upward pressure on fiscal expenditure, it is necessary to push ahead with structural reform of public finances on both the expenditure and the revenue side and maintain the public ’ s confidence in fiscal discipline. efforts to restore japan ’ s public finances are underway and are something that i will keep a close eye on. both upside and downside risks persist also in import prices, particularly international commodity prices. ii. monetary policy next, i would like to turn to the bank ’ s conduct of monetary policy under the current economic situation. in order for japan ’ s economy to overcome deflation and return to a sustainable growth path with price stability, efforts to strengthen the economy ’ s growth potential and support from the financial side are of the utmost importance. based on this recognition, the bank is currently providing support to raise japan ’ s growth potential through its fund - provisioning measure to support strengthening the foundations for economic growth, while at the same time pursuing powerful monetary easing continuously by steadily providing funds through, for example, purchasing financial assets. moreover, the bank is doing its utmost also to ensure stability in financial markets. in what follows, i will explain the bank ’ s measures in greater detail. a. pursuit of powerful monetary easing i will begin with the bank ’ s pursuit of powerful monetary easing. in october 2010, the bank introduced the comprehensive monetary easing policy, and has been easing financial conditions continuously since then. the comprehensive monetary easing policy consists of three measures : the implementation of a virtually zero interest rate policy by setting the target for the policy rate, the uncollateralized overnight call rate, at around 0 to 0. 1 percent ; the purchase of financial assets and funds - supplying operation through the asset purchase program ( hereafter the program ) ; and the clarification of the policy time horizon, that is, the clarification that these measures will

##s in overseas economies. thereafter, japan's economy is projected to continue growing at a pace above its potential growth rate as a virtuous cycle from income to spending advances on the back of the strengthened momentum for wage hikes and progress in the resumption of economic activity. meanwhile, the year - on - year rate of change in core cpi has been increasing. from the turn of 2023, the rate of increase is expected to decelerate with a smaller contribution to core cpi of rises in the price of such items as energy, food, and durable goods ( chart 3 ). b. risk factors for economic activity and prices the outlook just described is subject to a number of uncertainties ; specifically, i am particularly attentive to the following two factors. the first is developments in both overseas economic activity and prices and in global financial and capital markets. significantly high inflation continues due not only to a surge in global demand on the path to recovery from the pandemic, but also to the effects of supply - side constraints and russia's invasion of ukraine. in response, central banks have been raising policy rates sharply to contain high inflation, at the risk of economic slowdown. on the other hand, financial markets have been nervous due to some concern about consistency between monetary policy and fiscal policy, and also because of the difficulty in accurately measuring monetary tightening effects as there is a time lag between policy decisions and the materialization of their effects. in the united states and the euro area, policy rates have been raised substantially during 2022, by 3. 75 percentage points and 2. 0 percentage points, respectively. however, the latest rate of increase in consumer prices was 7. 7 percent in the united states and 10. 0 percent in the euro area, 1 both remaining well above target. this has led markets to expect further policy rate hikes. there is thus concern that it may become difficult to strike a balance between the containment of inflation and the sustainability of economic growth, depending on the degree of cumulative impact of substantial policy rate hikes. if this concern grows, there is a possibility that global financial and capital markets will tighten unexpectedly through adjustments in asset prices and foreign exchange rates and through capital outflows from emerging economies. this possibility must be borne in mind. the second factor is geopolitical risks and developments in the price of commodities, including grain. uncertainty remains very high regarding geopolitical factors such as the the u. s. figure is for october