the operation of such a virtuous cycle, thereby constraining the economic growth rate and price rises in a self - fulfilling manner. what then, is required to get out of such equilibrium? my answer is that it is not a magical wand, but instead strenuous efforts to be made by a wide range of entities. i think that it is all the more important that the bank, for its part, pursue price stability through pushing up inflation expectations and maintaining accommodative financial conditions under the new monetary policy framework. at the same time, the government and the private sector should play key roles with regard to moving forward. their actions toward raising wages strongly support the achievement of price stability. moreover, in order to achieve sustainable economic growth, i think that efforts such as the following are also essential ; namely, the government's promotion of a growth strategy and structural reforms, and the private sector's innovations in areas including human resource development as well as research and development. the bank will underpin these initiatives by maintaining accommodative financial conditions, thereby contributing to strengthening japan's growth potential in the long term. also, i expect that the bank's measures such as purchases of exchange - traded funds ( etfs ) composed of stocks issued by firms that are proactively making investment in physical and human capital, as well as loan disbursement under the fund - provisioning measure to support strengthening the foundations for economic growth, will assist initiatives by the private sector. if the outlook for prices and economic growth in japan brightens, the effects of monetary easing will heighten through a decline in real interest rates and a rise in the natural interest rate. i expect that the endeavors that the government, the private sector, and the bank are making together as one will bear fruit, and the virtuous cycle of the economy will start to operate vigorously on the new outlook for sustainable economic growth with price stability.

sides of the same coin. under qqe with yield curve control, the bank will continue with its large - scale purchases of jgbs in order to control interest rates. on this point, i would like to reiterate that there is no change in the bank's stance that it will continue with monetary easing from both the quantitative and interest rate aspects. iii. challenges facing japan's economy and monetary policy next, i would like to elaborate on my own thinking regarding challenges facing japan's economy and the bank's monetary policy conduct from a somewhat long - term perspective. over many years, the economy continued to see low growth under a moderate decline in prices. in january 2013, the government and the bank released a joint statement, and they have worked together since then to achieve sustainable economic growth with price stability. the economy is no longer in deflation, which is commonly defined as a sustained decline in prices, but the price stability target of 2 percent has not yet been achieved. although the economy has been on a moderate recovery trend, it has not yet fully succeeded in achieving sustainable growth as the potential growth rate has remained at a low level. under these circumstances, firms and households seem to be conducting their economic activities on the assumption that prices and the economic growth rate will not rise so much going forward. firms have maintained their cautious stance toward expanding their fixed costs, because they have not been confident regarding whether sales will increase steadily in the future. growth in business fixed investment and wages - - particularly in base pay, which leads to a permanent increase in wages - - has been slow relative to the improvement in corporate profits and the employment situation. households have also been cautious in increasing their spending, despite the rise in their incomes, as they see that it seems impossible to project a permanent expansion in income and / or a rise in prices. i view this current situation as a sort of equilibrium. in general, a virtuous cycle from income to spending among firms and households promotes sustainable economic growth and price stability. an increase in business fixed investment raises the potential growth rate through accumulation of capital and improvement in labor productivity. wage growth exerts upward pressure on prices mainly through expansion of firms'costs, as i have mentioned earlier, and an increase in household spending brings about improvement in the output gap, also leading to price rises. currently, however, it seems that the expectations for low inflation and low economic growth that have taken hold among firms and households have been hampering