of money as memory on record - keeping on market transactions may be a partial answer ( kocherlakota ( 2005 ) ). the public information shared commonly by board members and market participants is likely facilitate coordinated action toward returning to the normal state of the economy. [ 6 ] gerlach, s., and svensson, e. o. ( 2002 ) “ money and inflation in the euro area : a case for monetary indicators? ” cefp discussion paper, no. 3392. [ 7 ] hayashi, f., and prescott, e. c. ( 2002 ) “ the 1990s in japan : a lost decade, ” review of economic dynamics, vol. 5, 1. [ 8 ] ichiue, h., and ueno, y. ( 2006 ) “ monetary policy and the yield curve at the zero interest : the macro - finance model of interest rates as options, ” bank of japan working paper series, no. 06 - e - 16. [ 9 ] ikeo, k. ( 2006 ) “ the joy ride and self - protection of developmentalism : financial system and the heisei economy ” ( in japanese ), ntt publication. [ 10 ] iwamura, m., shiratsuka, s., and watanabe, t. ( 2006 ) “ massive money injection in an economy with broad liquidity services : the japanese experience 2001 - 2006, ” paper presented at the japan project meeting organized by the nber conference in tokyo. [ 11 ] iwata, k. ( 2005 ) “ the role of price stability anchor in extricating japan from deflation, ” speech at the jackson hall conference, august 2005. [ 12 ] kimura, t., kobayashi, h., muranaga, j., and ugai, h. ( 2002 ) “ the effect of quantitative monetary easing at zero interest rates, ” imes discussion paper series, no. 2002 - e - 22. [ 13 ] kimura, t., and small, d. ( 2006 ) “ quantitative monetary easing and risk in financial asset market, ” the b. e. journals in macroeconomics, vol. 16, issue 1. [ 14 ] king, m. ( 2002 ) “ no, money, no inflation : the role of money in the economy, ” the quarterly bulletin of the bank of england, summer 2002. [ 15 ] kiyotaki, n., and moore, j

common to what japan had experienced during the post - 1990s period of deflation. although these disinflationary trends have exerted some effects on short - term inflation expectations so far, medium - to long - term inflation expectations remain intact. such expectations in the united states and the euro area seem to be stable at around 2 percent ( chart 6 ). in light of japan ’ s experiences, however, a persistently low inflation rate entails a risk that people ’ s expectations might change, leading to a decline in medium - to long - term inflation expectations in line with the actual inflation rate. concerns over deflation in the united states are not yet as high as those in the euro area, but i consider it necessary to keep in mind the risk that not only short - term inflation expectations but also medium - to longterm expectations for the united states might decline given that the actual inflation rate has recently been below the level in the federal reserve ’ s outlook, partly due to the declining trend in energy prices brought about by the so - called shale gas revolution. regarding the potential growth rates that i have raised as another concern for the medium term, it has been pointed out from various quarters that there is a possibility of potential growth rates in advanced economies being somewhat lower than those before the 1990s, in reflection of the slowdown in the pace of increase in labor input and in technological innovation. 1 the recent growth rates in emerging economies are lower than those prior to the lehman shock, and there is much argument on whether the low growth rates are caused by cyclical or structural factors. if the decline in the potential growth rates has not been particularly significant, the current disinflationary trends seen in the united states and the euro area are due to the slack persisting in production capacity and in the labor market. and thus it can be said that the disinflationary pressure will start to weaken as this slack dissolves. but another interpretation is that the recent decline in the potential growth rates caused not only a decline in the natural rate of interest, but also a decline in the inflation rate that is consistent with developments in the natural rate of interest. as i have stated, depending on how the potential growth rates are understood, the inflation outlook – and consequently the implications for macroeconomic policy – can change. in this sense, the change in the federal reserve ’ s communication regarding the aforementioned reduction in the pace of its asset purchases is noteworthy. let me explain this in detail. although