economy – may not regain momentum soon. therefore, i am carefully monitoring these developments. b. domestic demand economic recovery this time has been led by the nonmanufacturing sector so far, mainly driven by private consumption. in order to have continued firm domestic demand, it is important to maintain a situation in which improvement in the employment and income situation supports consumption. another important factor in considering the future of domestic demand is the increase in firms ’ business fixed investment. turning to indexes related to consumption, private consumption remains resilient, but there is a sign of slowing in its growth momentum. the household activity - related diffusion indexes ( dis ) for current and future economic conditions in the economy watchers survey, which seem to reflect consumer confidence, dropped for the fifth consecutive month since april 2013. this development is consistent with that of real consumption expenditure in the family income and expenditure survey. the sign of slowing in consumption is also reflected to the latest gdp statistics. the real gdp growth rate in the july – september quarter of 2013 registered 0. 5 percent on a quarter - on - quarter basis. on an annualized quarter - on - quarter basis, it slowed to 1. 9 percent from around 4. 0 percent in the first half of the year. private consumption also slowed compared to the first half of the year, to 0. 1 percent on a quarteron - quarter basis. business fixed investment on the whole grew for the third consecutive quarter, reflecting an improvement in corporate profits, to 0. 2 percent on a quarter - on - quarter basis, but the recovery in the manufacturing sector still shows a lackluster performance. meanwhile, exports – which largely affect investment by manufacturing firms – lack resilience and decreased for the first time in three quarters, to minus 0. 6 percent on a quarter - onquarter basis. i think the key to the future of domestic demand lies particularly in the extent to which business fixed investment will grow under these circumstances, but that a full - fledged recovery of such investment will take time. c. outlook for prices as for the outlook for prices, i formulated a proposal to make the following changes in the october 2013 outlook report, although it was defeated by a majority vote during the bis central bankers ’ speeches monetary policy meeting ( mpm ). first, with regard to the outlook for prices toward the latter half of the projection period, i proposed to change the current expression that the year - onyear rate of change in the cpi “ is

the year - on - year rate of change in the cpi. this can be understood as a typical example of an inflation targeting policy ( chart 3 ). enhancing policy credibility and predictability an inflation targeting policy has a number of advantages. to begin with, as the policy contains a specific numerical target for the future inflation rate, it can be judged objectively whether the target has been met. through enhanced transparency, a central bank ’ s obligation to be accountable with regard to policy judgment and the status of achieving the target will become crucial. this will create a situation in which credibility in monetary policy is likely to be enhanced. as it becomes easier to forecast price levels, various economic entities can conduct their activity on the basis of such forecasts. the predictability of future prices will be further reinforced as credibility in monetary policy becomes enhanced. preventing hyperinflation regarding the bank ’ s policy, some raise concern that, when the time comes for the bank to change the course of monetary policy, it might be difficult to do so due to pressure from bis central bankers ’ speeches financial markets or the government, and this eventually leads to inducing hyperinflation. the adoption of inflation targeting is effective in terms of alleviating such concern. the reason for this is that an inflation targeting policy is a device to hold a specific numerical target for the future inflation rate and make a commitment to achieving a situation that generates neither inflation above the target rate nor deflation. though an inflation targeting policy is often discussed in japan as a measure to overcome deflation, it was originally adopted in the 1980s in countries that suffered high inflation, such as new zealand. i would like you to understand that, in case the economy should overheat and the inflation rate should rise well above the 2 percent price stability target, the bank will take appropriate measures in line with the framework of an inflation targeting policy. this has already been made as a firm commitment. i should stress that, in line with the mission stipulated in the bank of japan act, the bank will conduct monetary policy based on its judgment and responsibility while facilitating communication with the government. ii. quantitative and qualitative monetary easing now, i will talk about the content and transmission mechanism of the qqe, which was introduced as a policy to overcome deflation. a. two pillars of the qqe the bank set the price stability target of 2 percent in terms of the year - on - year rate of change in the cpi. it has been pursuing bold