demand picking up, supported by economic stimulus measures. as a main scenario, overseas economies, particularly advanced economies, are expected to continue to grow moderately, and emerging economies are likely to move out of the deceleration phase. on that basis, although japan ’ s exports are expected to remain more or less flat for the time being, they are likely to increase moderately thereafter. needless to say, due attention needs to be paid to risk factors including developments in the emerging economies and in the global financial markets. ii. japan ’ s price developments i will next talk about japan ’ s price developments. the year - on - year rate of increase in the cpi ( all items less fresh food ) increased from minus 0. 5 percent just before the introduction of qqe to 1. 5 percent in april 2014, excluding the direct effects of the consumption tax hike. however, as somewhat weak developments in private consumption continued after the consumption tax hike and crude oil prices declined substantially from summer last year, annual cpi inflation declined and has been about 0 percent since the turn of the year ( chart 6 ). the absence of an acceleration in headline cpi inflation can be attributed to the negative contribution of energy prices. because of this negative effect, the year - on - year rate of bis central bankers ’ speeches increase in the cpi has been pushed down by about 1 percentage point in recent months. needless to say, unless crude oil prices continue to decline, the negative contribution of energy prices to the year - on - year rate of increase in the cpi eventually will dissipate. simple arithmetic shows that the negative contribution of energy prices falling off alone will push up the year - on - year rate of increase in the cpi by about 1 percentage point compared with the current level. in addition, although the effects of the decline in energy prices have made it hard to discern, the underlying trend in inflation has steadily improved. for example, the year - on - year rate of change in the cpi for all items less fresh food and energy has been positive for 23 consecutive months since october 2013, and has increased to 1. 1 percent according to the latest figure in august. behind such steady improvement in the underlying trend in inflation is that firms ’ and households ’ views on prices have changed. the changes in firms ’ and households ’ views on prices have been revealed in their wageand price - setting behavior. to begin with, in the spring wage negotiations between workers and management last year, base pay was increased for the

a stable manner. the observed inflation rate could move, reflecting various temporary factors ; thus, in order to achieve 2 percent in a stable manner, the underlying trend in inflation is important. as i described earlier, the trend has been improving steadily. however, the positive feedback loop between the increases in employment and wages and the rise in inflation should gain further momentum in order to achieve the price stability target of 2 percent. bis central bankers ’ speeches the bank will continue with qqe, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. it will examine both upside and downside risks to economic activity and prices. the bank maintains its policy stance that, when there are changes in trend inflation due to manifestation of risk factors, it will make adjustments without hesitation if judged as necessary to achieve the price stability target at the earliest possible time. concluding remarks lastly, i would like to touch on the point that i believe is most important to ensuring that a virtuous cycle of the japanese economy will continue to work. now firms are enjoying record profits and the labor market is in a full - employment condition. in light of the mechanism of the economy, this naturally would lead to decent economic growth and to moderate increases in wages and prices, a view that i also share. at the same time, it is also true that the pace of increase in fixed investment and wages is lackluster in light of record profits. this is perhaps because deflation has been protracted in japan and it takes time to change the deflationary mindset of firms and households. with this in mind, the bank will continue to strongly commit itself to overcoming deflation and to achieving the price stability target of 2 percent. as i have explained on several occasions, in a situation where the 2 percent target is achieved in a stable manner, the current low interest rate environment would not last and the labor shortage would be more acute. those who act early to move forward to secure opportunities in the future by utilizing profits currently at hand will be rewarded, and i am sure some of you have already started to act. the mechanism of the economy will surely prevail, and the bank will definitely and decisively play its role. i will conclude my remarks by making this promise. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches