year - on - year rate of increase in the cpi simply marks 2 percent, but rather one in which people ’ s medium - to long - term inflation expectations are re - anchored at around bis central bankers ’ speeches 2 percent – in other words, a situation in which households and firms are projected to shift their consumption and investment behavior to one that assumes around 2 percent inflation. the status of achieving the price stability target and the necessity of continuing qqe will be judged by the bank ’ s policy board at each monetary policy meeting. in doing so, i would like to take into account ( 1 ) the effects of qqe after its expansion, ( 2 ) the sustainability of the bank ’ s massive jgb purchases, and ( 3 ) a wide range of qqe ’ s side effects, all of which i will elaborate on shortly. b. effects of qqe after its expansion the first point that needs to be examined in continuing with qqe is its policy effects ( chart 17 ). after the expansion of qqe at end - october 2014, the 10 - year jgb yields temporarily dropped below 0. 2 percent, but these recently have recovered to around the level seen prior to the expansion. meanwhile, the market ’ s outlook for economic activity and prices has actually been revised downward, and therefore there is a lack of persuasive evidence of a further rise in inflation expectations. one of the assumed transmission mechanisms of qqe is to put downward pressure on nominal interest rates across the entire yield curve through massive purchases of jgbs. i understood the expansion of qqe at end - october 2014 as an action that would strengthen such a mechanism. in reality, however, it appears to me that the degree of difficulty in implementing qqe is rising, as the effect of lowering nominal interest rates has been diminishing gradually, due mainly to a rise in liquidity premiums, despite a large - scale expansion of the bank ’ s jgb purchases. let me give you some background as to why it has become difficult for long - term interest rates to decline. first, interest rate levels are already low, and it is becoming difficult to see a linear relationship between the amount of jgb purchases and interest rates. second, there tends to be less demand for jgbs from final investors under extremely low interest rates. third, dealers ’ risk tolerance is declining, as there is an increase in volatility due to the decline in market

y % chg. cpi cpi cpi - 5 cy 1980 y / y % chg. - 5 cy 1980 - 5 cy 1980 note : figures for germany prior to the reunification of the country are those for the former west germany. figures for the united kingdom prior to 1989 are from " a millennium of macroeconomic data " compiled by the boe, and those from 1989 onward are from office for national statistics ( ons ) data. sources : boe ; oecd ; ons. chart 2 policy interest rates in the united states and europe % united states euro area united kingdom - 1 cy 18 note : figures for the united states are the medians of the target ranges for the federal funds rate. those for the euro area are the rates on the deposit facility. sources : bis ; boe ; ecb ; frb. chart 3 developments in financial markets 10 - year government bond yields % u. s. dollar / yen and euro / yen japan united states germany yen u. s. dollar / yen euro / yen yen depreciation yen appreciation - 1 cy13 source : bloomberg. cy13 chart 4 imf forecasts for global growth major economies'growth rates global growth rate y / y % chg. y / y % chg. imf forecasts cy 2020 cy 2021 cy 2022 cy 2023 [ forecast ] - 2. 8 6. 3 3. 5 3. 0 3. 0 - 4. 2 5. 4 2. 7 1. 5 1. 4 united states - 2. 8 5. 9 2. 1 1. 8 1. 0 euro area - 6. 1 5. 3 3. 5 0. 9 1. 5 united kingdom - 11. 0 7. 6 4. 1 0. 4 1. 0 japan - 4. 3 2. 2 1. 0 1. 4 1. 0 - 1. 8 6. 8 4. 0 4. 0 4. 1 world advanced economies 1990 - 2019 average : + 3. 6 % - 1 emerging market and developing economies - 2 cy 2024 [ forecast ] - 3 china 2. 2 8. 4 3. 0 5. 2 4. 5 - 4 india - 5. 8 9. 1 7. 2 6. 1 6. 3 asean - 5 - 4. 4 4. 0 5. 5 4. 6 4. 5 - 5 - 6 cy 00 02 04 06 08 10 12 14 16 18 20 22 24 note : figures are as of july