decline in real interest rates, such as calculating the degree of downward effects on real interest rates brought about by the bank ’ s cumulative jgb purchases thus far ; interestingly, regardless of the method employed, the results have been mostly the same. the fact that similar results are obtained from different methods means that it is reasonable to judge that, numerically, real interest rates have declined by less than 1 percentage point ; medium - to long - term inflation expectations have increased by about 0. 5 percentage point and nominal long - term interest rates have decreased by about 0. 3 percentage point. according to research conducted in the united states and europe, a decline in long - term interest rates has policy effects on economic activity and prices that are approximately a couple of times larger than those of a decline in short - term interest rates. moreover, our empirical analysis of downward pressure from qqe on nominal interest rates across the entire yield curve showed that, if the same effect were to be gained exclusively through the decline in short - term interest rates, it would be necessary to decrease the rate by about 2 percent. while these analyses are subject to a margin of error due to the situation for each country and to the relevant premises, the policy effects of qqe are such that they are roughly equivalent to those that would arise from making almost ten 0. 25 percent cuts in short - term interest rates in one shot under conventional monetary policy. financial markets responded to qqe relatively swiftly. stock prices have increased substantially and the appreciation of the yen was corrected in the foreign exchange markets. lending, including that to small and medium - sized enterprises ( smes ), has been increasing moderately, at a pace of 2. 5 – 3. 0 percent on a year - on - year basis recently. in addition to the decline in real interest rates, such developments have made financial conditions even more accommodative. economic activity and prices under qqe with qqe producing effects, a virtuous cycle from income to spending has been operating in both the corporate and household sectors, and the economy has seen a significant turnaround. in the corporate sector, profits have improved to their highest level historically and fixed investment has been on a moderate increasing trend ( chart 3 ). meanwhile, exports, which had been lacking momentum despite the correction of the appreciation of the yen, have finally been picking up clearly, as seen in their increase for three consecutive quarters since the july - september quarter of 2014 ( chart 4

of firms ’ relocation of production overseas, which had taken place amid the excessive appreciation of the yen, were more significant than i had expected. because of these effects, bis central bankers ’ speeches it is only recently that exports have picked up. during the second year – in fiscal 2014 – private consumption was weaker than expected. this was attributed to the effects of the decline in demand following the consumption tax hike being somewhat prolonged, as well as to other factors, such as the effects of the bad weather last summer. from consumers ’ perspective, it was natural that they perceived the consumption tax hike as being part of price increases. given that the rate of wage increases did not catch up with that of price increases including the tax hike, private consumption weakened. such effects on private consumption have been anticipated since tax hikes place a burden on consumers, but they have been somewhat larger than our expectations. on top of this, i would note the decline in crude oil prices, which amounted to a 60 percent drop within about six months, as the most unexpected event. as a result, the cpi inflation rate has declined to about 0 percent from 1. 5 percent. this decline in the inflation rate created a risk for the mechanism of qqe – namely, the formation of inflation expectations in particular – and this was why the bank decided to expand qqe. despite these unexpected events, the mechanism of qqe has been operating as intended. during the past two years, qqe – in tandem with the government ’ s policy measures – has markedly changed people ’ s negative mindset, which had taken root under deflation. if the economy continues its turnaround and deflation is to be overcome, japan will provide a rare example of a regime shift through macroeconomic policy. despite some unexpected events, i feel encouraged by the fact that the big picture of economic development for these two years is in line with what we envisioned at the outset. the bank will continue to steadily pursue qqe to achieve the price stability target of 2 percent at the earliest possible time. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches