of the fiscal structure reform act in the mid - 1990s. in practice, a balanced approach may be required between a medium - to long - term commitment for fiscal consolidation and the short - term flexibility in policy. even so, the government should ensure that it will not lose sight of the importance of fiscal consolidation and that it will reinforce its medium - to long - term commitment on that front. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches references christiano, lawrence j. and terry j. fitzgerald, “ price stability : is a tough central bank enough? ”, economic commentary, federal reserve bank of cleveland, 2000a. christiano, lawrence j. and terry j. fitzgerald, “ understanding the fiscal theory of the price level ”, economic review, 36 ( 2 ), federal reserve bank of cleveland, 2000b. cochrane, john h., “ money as stock : price level determination with no money demand ”, nber working paper, no. 7498, 2000. leeper, eric m., “ equilibria under active and passive monetary and fiscal policies ”, journal of monetary economics, 27, 1991. sims, christopher a., “ the precarious fiscal foundations of emu ”, de economist, 147 ( 4 ), 1999. sargent, thomas j. and neil wallace, “ some unpleasant monetarist arithmetic ”, federal reserve bank of minneapolis quarterly review, 5 ( 3 ), 1981. woodford, michael, “ control of the public debt : a requirement for price stability? ”, nber working paper, no. 5684, 1996. woodford, michael, “ fiscal requirements for price stability ”, journal of money, credit and banking, 33, 2001. bis central bankers ’ speeches

earthquake and irregular weather in summer. despite these circumstances, household sentiment showed resilience. i consider that one of the factors of this is likely to have been the tightening of labor market conditions ( chart 2 ). private consumption has shown some signs of improvement, driven by a moderate increase in employee income. on the back of tightening labor market conditions, a modest increase in employee income has been seen ( chart 3 ). in japan, the action of increasing annual wage levels by revising the pay table is referred to as " base up. " this is a general wage increase made across all employees, apart from wage increases due to promotion, based on age, and / or the number of working years. this is a practice that was introduced during the rapid economic growth period. however, from the late 1990s, firms stepped up their efforts to contain labor costs. as a result, most firms stopped using base up from the 2000s. meanwhile, in the wage negotiations in 2014 and thereafter, this practice has been widely resumed among firms for the first time in more than a decade. this year is the fourth one since such trends have been visible, but some are concerned that the results of the negotiations this year would be disappointing given that the year - on - year rate of change in the consumer price index ( cpi, all items less fresh food ) has been slow to increase recently, due mainly to the fall in energy prices. even so, now that employees'concerns are not over a wage cut, but rather how much wages will increase, we are at least heading in the right direction considering the fact that hardly anybody had talked about base up as an issue for nearly 20 years until a few years ago. private consumption has shown some signs of improvement recently, given household sentiment being supported and improved employee income. my impression is that a virtuous cycle from income to spending has been maintained in the household sector. however, there are the following points to consider : ( 1 ) wage increases are weak despite tightening labor market conditions, and ( 2 ) consumption is rather lackluster despite the steady improvement in employee income. that is to say, consumption has shown some signs of improvement but has lacked momentum. therefore, the virtuous cycle from income to spending should become a little more promising. 2. corporate sector corporate profits have been at record high levels, but firms have been taking a cautious view on the outlook. corporate profits in japan reached record highs from fiscal 2013 through fiscal 2015, and have remained at