to talk about the conduct of monetary policy. in april this year, the bank committed to achieving the 2 percent price stability target at the earliest possible time, with a time horizon of about two years, and introduced the qqe to underpin the commitment. specifically, it would increase the monetary base at an annual pace of about 60 – 70 trillion yen and double the monetary base in two years. in order to do so, it would purchase japanese government bonds ( jgbs ) so that the amount outstanding of jgb holdings would increase at an annual pace of about 50 trillion yen ( chart 12 ). while the chart shows the outstanding amounts of the monetary base and jgb holdings as of end - 2013 and end - 2014, these are projected amounts under the current policy and do not suggest in any way a time limit of the policy conduct. as i will mention later, the bank will continue with the qqe, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining the target in a stable manner. the effects of the qqe are expected to carry through the economy via several different routes, and the most important of these is to lower real interest rates. to be specific, first of all, by committing to achievement of the 2 percent price stability target at the earliest possible time and announcing the continuation of a new phase of monetary easing into the future to underpin that commitment, the bank aims to drastically change people ’ s expectations and raise inflation expectations. second, it will put strong downward pressure on nominal long - term interest rates through massive purchases of jgbs. consequently, real interest rates could be lowered if the extent of a pick - up in nominal rates can be contained within the extent of a rise in inflation expectations. and the decline in real interest rates is expected to have the effect of stimulating business fixed investment and household spending. for the last eight months, our endeavor on this front has been successful. according to surveys on households and economists, inflation expectations seem to have been rising on the whole ( chart 13 ). by contrast, long - term rates have remained stable at a low level of around 0. 6 percent in japan despite the rise in long - term interest rates in other advanced economies ( chart 14 ). therefore, real interest rates have been declining. under such stimulative effects, japan ’ s economy has been recovering moderately and the year - on - year rate of change in the cpi has turned positive.

a concentration of risks in particular regions or with respect to particular firms. this new awareness, through a rethinking of business strategies, could generate new investment in, for example, computer centers and distribution depots. the accident at the fukushima daiichi nuclear plant has triggered active global discussion on nuclear power policy, which will highlight the importance of energy conservation and environmental technologies. and as japanese firms have an edge in those areas, such as high - end batteries, there will be great room for them to make contributions. iv. tasks ahead for japan ’ s economic rebuilding various challenges lie ahead on the road to overcoming the adverse effects of the earthquake and rebuilding japan ’ s economy. the first challenge is ensuring the necessary financing for rebuilding. in this regard, japan has continued to have a current account surplus. in other words, japan has had an excess of savings over investment for a protracted period, which means that, from a macroeconomic perspective, this financing will not be difficult ( chart 8 ). japan ’ s capacity for foreign currency funding is extremely strong, given that the country is the biggest creditor nation in the world, with net external assets of 2. 9 trillion u. s. dollars, or 57 percent of nominal gdp. private financial institutions are fully able to meet an increase in financing demand for rebuilding. rumors have circulated that japanese insurance companies would sell foreign currency assets due to an increase in payments of insurance claims relating to the earthquake and subsequent events. these companies have ample short - term liquid assets, so they do not need to sell their foreign currency assets in order to make the payments. meanwhile, japanese government bonds have been issued quite smoothly and long - term interest rates have remained stable at low levels compared with other countries. as long as japan continues to work tirelessly toward rebuilding, it is unlikely financing problems will arise. the second challenge is raising japan ’ s potential growth rate. since 2000, japan has had one of the highest gdp growth rates per worker among g - 7 countries, although slightly lower than the united states ( chart 9 ). however, the decline in the working - age population in japan is proceeding at a pace that has no precedent in modern economic history ( chart 10 ). as a result, japan ’ s economic growth has been on a downtrend. raising the potential growth rate was the biggest challenge for japan ’ s economy even before the earthquake, but the efforts to do so by raising both the labor participation rate and productivity have now become all