in september of that year. 1. basic mechanism of monetary easing since the introduction of qqe in april 2013, the basic mechanism of monetary easing itself has not changed ; that is, ( 1 ) pushing down the entire yield curve through the bank's large - scale purchases of japanese government bonds ( jgbs ), and ( 2 ) raising inflation expectations through the bank's strong commitment to the 2 percent price stability target. the transmission mechanism envisaged by the bank is that these factors will lead to a reduction in real interest rates, thereby producing positive effects on japan's economic activity and prices ( chart 5 ). 2. positive effects of qqe in 2016, the bank conducted a comprehensive assessment of the developments in japan's economic activity and prices as well as policy effects since the introduction of qqe. the findings of the assessment are that the mechanism just described has been operating firmly, such that even long - term real interest rates have been in negative territory, and that economic activity and prices have largely improved. the underlying trend in the cpi ( all items less fresh food and energy ) turned positive and has been in such territory for more than two and a half years ; this also leads to the judgment that, through the achievement of highly accommodative financial conditions, japan's economy has reached a state of being no longer in deflation, which is commonly defined as a sustained decline in prices ( chart 6 ). it is reasonable to regard this as achievements accomplished under qqe. 3. aims of qqe with yield curve control despite the fact that qqe has proven to be effective in this manner, why did the bank introduce last year qqe with yield curve control as a means of strengthening the framework for monetary easing? my understanding is that there are two points as the background to this. first, although qqe has produced its intended effects, the price stability target of 2 percent has not been achieved, and therefore a more effective framework was necessary. second, while it was confirmed that the combination of large - scale purchases of jgbs and the negative interest rate policy was effective in influencing the entire yield curve, there was concern over a possibility that this combination could in some cases push down the yield curve more than necessary, thereby having a negative impact on financial functioning. let me briefly elaborate on this second point. in japan, because the level of interest rates - including long - term ones - - has remained low

in pursuing qqe, it is essential to carefully examine regional economies, including the performance of small and medium - sized firms, through the bank ’ s nationwide branch network, including the bank ’ s shizuoka branch. in this respect, information that is kindly provided to us from industry and financial institutions in this region is invaluable. i would like to continue to seek your cooperation with respect to research and other activities of the shizuoka branch. i sincerely hope that the various initiatives in shizuoka prefecture will bear fruit and the region will enjoy further growth in the future. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches