and capital markets at home and abroad have been extremely volatile, the bank is monitoring developments in these markets and their impact on economic activity and prices with utmost vigilance, and it will conduct monetary policy as appropriate. let me reiterate my view that the bank needs to maintain monetary easing with the current policy interest rate for the time being. iv. recent and future economic activity in southern hokkaido lastly, i would like to talk about the economy of southern hokkaido, centered around hakodate. established in 1893, the hakodate branch is the bank's third oldest existing site in japan. we have been operating at this historic location for over 130 years. we intend to continue contributing to the region through our operations, including the provision of central banking services and information that will benefit the regional economy. in doing so, we would like to ask for your continued support and cooperation. the bank assesses that the economy of southern hokkaido has picked up. tourism, which is a major industry in the region, has been partly constrained by labor shortages. however, the regional economy has been boosted by significant numbers of tourists brought in by events such as the premiere of a popular animated movie that is set in the region, the arrival of cruise ships, the hakodate marathon, and large - scale conventions. on the other hand, the economy faces serious structural issues. the fishing - related industry, which along with tourism has been a driver of the regional economy, has remained in an extremely severe situation, due to a prolonged downturn in catches, especially of japanese flying squid. moreover, the region's workforce, which is essential to revitalizing industries and fostering a new economy, has continued to decline at a faster pace than in other regions across japan. in particular, the outflow of young people is an issue weighing heavily on the economy of southern hokkaido. even amid such adversities, being blessed with a wealth of tourism resources, southern hokkaido has seen the steady emergence of new and promising developments that take advantage of its natural features. in the agricultural sector, while the region already boasts local specialties such as potatoes, leeks, and pumpkins, it has seen an expansion in the production of wine and sake ( rice wine ). in the fishing sector, where scallops, sea cucumbers, sea urchins, and kelp are well - known, operators of salmon farms have been trying to promote their salmon through the building of brand recognition. in the energy

that the correlation is statistically significantly lower in japan than in the united states and europe, suggesting that japanese firms have been hesitant to raise prices even when faced with supplyside constraints. such a cautious stance among japanese firms has likewise been seen in the labor market ; even when faced with labor shortages, for example, japanese firms prioritize maintaining employment in the long term and have been reluctant to raise wages. third, issues concerning the measurement of price indexes may also have a non - negligible impact on japan ’ s inflation rate ( chart 8 ). services prices in japan ’ s cpi show that price developments in housing rent and mobile phone charges, both of which have relatively large weights, have been weaker in recent years than those in the united states and europe. the two items are typical examples of services for which prices are difficult to measure with a high degree of accuracy. i think it would be worthwhile to deepen our understanding of the differences across countries and regions in terms of statistical practices. conclusion i have described the differences in inflation in the united states, europe, and japan that have been brought to light once again by the pandemic. to conclude, i would like to talk about something that i have long been wondering about with regard to the difference in inflation rates between japan and the united states from a longer - term perspective ( chart 9 ). the fact that japan ’ s inflation rate is below that of the united states is not a phenomenon that began in the second half of the 1990s, which was during the deflationary period, but one that has continued since the second oil shock. before around 1980, japan consistently had higher inflation than the united states, and it was japan that suffered a surge in inflation at the time of the first oil shock, having the highest rate among advanced economies, at over 20 percent. it is well known that the bitter experiences of the two oil shocks and stagflation have led to the rapid development of theories on inflation expectations within academia, and that these theories have had a significant impact on the monetary policy conduct of central banks, including the bank of japan. 2 monetary policy conduct that takes the importance of inflation expectations into account has led to the low and stable inflation rates in japan and the united states since the 1980s, and it could be said that this is the result of close interactions between academia and policymakers. however, there has not really been a very convincing explanation for why japan and the united states switched places in terms of their