be contained within the extent of a rise in inflation expectations. as the spending behavior of firms and households is influenced by real interest rates, the decline in real interest rates will stimulate business fixed investment, housing investment, and household consumption, thereby providing a strong backing to the economy. if the supply and demand balances in goods and services as well as labor supply and demand conditions tighten as the economy recovers, there will be upward pressure on prices. if actual prices rise, this will further lead to raising the people ’ s inflation expectations. in sum, triggered by a rise in inflation expectations through a new phase of monetary easing, we will generate a virtuous cycle of a decline in real interest rates, an improvement in economic activity, a rise in actual prices, and a rise in inflation expectations. for the last six months, our endeavor on this front has been successful. as i said before, inflation expectations appear to be rising on the whole. by contrast, long - term rates remain stable at a low level of around 0. 6 percent in japan despite the rise in long - term interest rates in other economies ( chart 13 ). bank lending rates have declined to a historic low level. in such situation, real interest rates should be declining. with such stimulative effects coming from monetary easing, japan ’ s economy has entered a recovery phase and the cpi has turned positive. what contributes to a rise in people ’ s inflation expectations is not just the bank saying that it will achieve the 2 percent inflation, but also the fact that actual prices have been rising. as i have explained to you today, the qqe has been exerting its intended effects. under the qqe, japan ’ s economy has been following the path toward achieving the 2 percent price stability target as expected. the bank will continue with the qqe, aiming to achieve that target, as long as it is necessary for maintaining it in a stable manner. it will thoroughly examine both upside and downside risks to economic activity and prices, and make adjustments as necessary to achieve the price stability target. with such conduct of bis central bankers ’ speeches monetary policy, the bank will surely manage to overcome deflation, which has been the challenge for nearly 15 years. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

data? is the glass half full or half empty? figures 1 and 2 suggest the glass is half full, as business investment has been recovering and reached pre - crisis levels. but we should also be wary of signals that suggest the glass might be half empty. given the ample cash holdings of non - financial corporations, and very favorable financing conditions, one would expect investment growth to have accelerated even further. to understand why investment growth has thus been weaker, i ’ ll turn to the second question. question 2 : what has been driving the observed developments in euro area business investment ( or why is investment growth not accelerating? ) before we look at the empirical evidence, i ’ d like to briefly discuss the two hypotheses that have gained currency : the secular stagnation hypothesis and the financial cycle hypothesis. according to the secular stagnation hypothesis posited by summers, the global economy faces a structural aggregate demand deficiency. and this is also likely to persist in the future. investment is not therefore accelerating because demand is structurally low. according to the financial cycle hypothesis, maintained by the bank of international settlements, the global economy is currently struggling with the adverse consequences of a financial slump. investment recovery has been suppressed because households, firms and governments have been deleveraging. the two hypotheses differ based on the length of the decline in investment. whereas the financial cycle hypothesis argues that investment is temporarily low, the secular stagnation hypothesis predicts permanently low investment. despite their differences, both hypotheses have a common denominator : demand. in particular, uncertain future global demand is seen as a key factor weighing on business investment growth. figure 3 : historical shock decomposition of real business investment growth percentage points - 5 - 10 - 15 foreign demand real lending rate real gross operating surplus real stock prices - 20 uncertainty * real consumption real business investment * average over various uncertainty indices ( consensus, policy, macro, financial, jurado et al. ) source : dnb let ’ s look at figure 3. it shows a historical shock decomposition for the netherlands based on a vector auto regression analysis, or var. we can see that business investment growth was largely driven by uncertainty shocks and foreign demand shocks, represented by the red and the blue bars, respectively. uncertainty is measured here as an average of various uncertainty indices. it has had a positive impact on business investment since 2013. foreign demand has had a negative impact on real business investment over that same period. these results therefore suggest