emu in the light of the ongoing debate about prospective membership and about how far the ecb will in practice be free to pursue its statutory task of maintaining price stability. it may, on the other hand, simply reflect some kind of market imperfection. the same analysis can be applied to italy and spain, for example, to try to assess market expectations about their possible membership of emu as part of the first wave. it shows that notwithstanding the recent falls in short - term interest rates in those countries - which can largely be explained by their improved economic performance - 5 years forward yields remain significantly higher than those in germany and france suggesting that early emu membership is not at all certain in the eyes of the markets. what can we conclude from all this, mr. chairman? well, the conclusions that i draw are essentially threefold and hardly very surprising. i conclude, first, that markets at present are reasonably persuaded that the world economy as a whole will remain relatively stable at least by comparison with much of the post war period. excluding short - term influences, bond yields in the major countries - apart from the special case of japan - are converging around a level of around 7 % which suggests that relative macro - economic, monetary and fiscal discipline will be sustained, though it will stop short of effective price stability. i conclude, secondly, that the markets see current developments in the us and the uk as essentially cyclical ; and that they anticipate a pick - up in activity elsewhere somewhat further ahead. and i conclude, thirdly, that there remains some considerable uncertainty about the prospect for european monetary union, in particular about its initial membership but also about the extent of the discipline it will involve. now, of course, these conclusions are based on the bond markets as they currently are, which is a bit like forecasting the past! what you really need to know is how the markets will evolve in the future. happily it is not my task to venture down that path. it is during our next session that the market experts will seek to “ forecast the future ”. but i do hope they will tell us whether they agree that relative stability will indeed persist, in the medium and longer term, how they see the different national situations evolving in the more immediate future, and what prospects they see for emu. these seem to me to be the key issues for the future and i look forward to listening to what they have to say.

is expected to reach around 2 percent toward the latter half of the projection period of fiscal 2013 – 15. 4 personally, i am aware of the possibility that it may take some time to achieve the 2 percent target, since the duration depends crucially on “ the pace of improvement in the employment and income situation in japan. ” moreover, it is possible that it may take even longer to achieve a situation where the 2 percent target is maintained in a stable manner, considering the duration required to judge whether the condition described as “ in a stable manner ” is met. during this period, support from monetary policy is likely to be necessary. bear in mind here that the bank adopted the 2 percent target in january 2013, assuming that such an inflation rate should be sustainable. 5 hence, the bank ’ s decisions on the necessity and measures of future monetary easing should be judged in line with the objective to pursue a society with 2 percent price increase in a stable manner. why is the bank ’ s forward guidance so different from that of the federal reserve? the form of forward guidance adopted by the bank differs from that of the federal reserve on several fronts ( chart 4 ). first, the federal reserve applies forward guidance to its primary short - term policy interest rate ( the overnight federal funds rate ) and provides guidance to the the consumption tax rate in japan is scheduled to increase from 5 percent to 8 percent in april 2014 and further to 10 percent in october 2015. the hikes are expected to raise cpi - based inflation by about 2 percentage points for fiscal 2014 and by 0. 7 percentage point for fiscal 2015, respectively. when assessing the inflation rate, the bank disregards the effects of these increases as they are temporary. the joint statement of the government and the bank of japan on overcoming deflation and achieving sustainable economic growth, released in january 2013, stated, “ the bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of japan ’ s economy make progress. ” based on this recognition, the bank set the 2 percent target. bis central bankers ’ speeches markets and the public about how long it expects to keep the current exceptionally low level. in other words, the federal reserve attempts to exert downward pressure on longer - term interest rates by influencing expectations of the markets and the public regarding the continuation of the current low level of short - term interest rates over an extended period of time. asset purchases are regarded as