rates. following the introduction of the qqe, as longterm interest rates rose compared with those immediately before the introduction, some questioned whether the policy transmission mechanism of putting powerful downward pressure on long - term interest rates was working effectively. bis central bankers ’ speeches before examining this point, let me summarize factors that put upward and downward pressure on long - term interest rates. long - term interest rates are formed based on expectations for future short - term interest rates and on risk premiums ( chart 18 ). for example, in the case of 10 - year government bond yield, this will be the sum of the short - term interest rate path for the next ten years and various risk premiums associated with holding government bonds. of those, given that expected short - term interest rates will be determined according to economic and inflation outlooks, if economic activity improves and expectations for future price increases spread, there will be upward pressure on long - term interest rates. risk premiums will increase, reflecting such factors as a rise in interest rate volatility or in interest rates overseas, thereby putting upward pressure on long - term interest rates. in response, the bank ’ s massive purchases of government bonds under the qqe will put a powerful squeeze on the risk premiums, thereby having the effect of putting downward pressure on long - term interest rates. let us confirm whether this effect has actually materialized, based on two facts. first is the comparison with last autumn, when long - term interest rates were almost at the same level as today. comparing the situation of financial markets and the outlook for economic activity and prices, stock prices have risen about 60 percent from about 9, 000 yen last autumn and the yen rate against the u. s. dollar has depreciated about 25 percent from 75 – 79 yen. when looking at the outlook for economic activity and prices using the esp forecast survey, which compiles economists ’ forecasts, the outlook for the real gdp growth rate for fiscal 2013 has improved substantially from 1. 54 percent as of october 2012 to 2. 75 percent as of july 2013, and the outlook for the year - on - year rate of change in consumer prices has also increased from 0. 11 percent to 0. 36 percent during the same period. the economic and inflation outlooks for the longer term have also been revised upward. while such improvement in financial markets and the outlook for economic activity and prices naturally create upward pressure on long - term interest rates, actual long

. a., cy 2015 = 100 % 3. 5 japan united states european union nies and asean latin america 3. 0 2. 5 2. 0 cy 15 cy 15 dec. feb. apr. jun. june aug. note : the right - hand chart shows the share of the total population that is fully vaccinated against covid - 19. sources : ministry of internal affairs and communication ; cabinet office ; our world in data. chart 5 i. developments in economic activity and prices consumer prices contribution to cpi 1. 6 inflation rate and output gap y / y % chg. y / y % chg. 8 % 1. 2 output gap ( left scale ) 0. 8 0. 4 cpi ( less fresh food and energy, right scale ) mobile phone charges - 2 - 1 effects of the " go to travel " campaign effects of the consumption tax hike and free education policies energy - 4 - 2 - 6 - 3 0. 0 - 0. 4 - 0. 8 - 1. 2 - 1. 6 excluding the above factors 2020 - base cpi cpi ( less fresh food ) - 2. 0 cy - 8 cy 85 - 4 notes : 1. in the left - hand chart, figures for energy consist of those for petroleum products, electricity, and gas, manufactured & piped. figures for the " effects of the consumption tax hike and free education policies " from april 2020 onward are staff estimates and include the effects of measures such as free higher education introduced in april 2020. 2. in the right - hand chart, the cpi figures are staff estimates and exclude mobile phone charges and the effects of the consumption tax hikes, policies concerning the provision of free education, and the " go to travel " campaign, which covers a portion of domestic travel expenses. figures for the output gap are staff estimates. sources : ministry of internal affairs and communications ; bank of japan. chart 6 i. developments in economic activity and prices core indicators of prices measures based on price change distribution 1. 2 diffusion index of price changes y / y % chg. % points % diffusion index ( left scale ) share of increasing items ( right scale ) share of decreasing items ( right scale ) 0. 8 0. 4 0. 0 - 20 - 40 trimmed mean - 0. 4 weighted median mode - 0. 8 - 1. 2 cy15 - 60 cy15 notes : 1. in the left - hand chart, figures are based on staff calculations using the cpi excluding the effects