. ii. the bank's monetary policy next, i will talk about the bank's monetary policy. a. quantitative and qualitative monetary easing ( qqe ) with yield curve control at the monetary policy meeting held in september 2016, with a view to achieving the price stability target of 2 percent at the earliest possible time, the bank decided to introduce qqe with yield curve control as a means of strengthening the framework for monetary easing. this consists of two major components. the first is an " inflation - overshooting commitment " in which the bank commits itself to continuing to expand the monetary base until the year - on - year rate of increase in the observed cpi exceeds the price stability target of 2 percent and stays above the target in a stable manner. japan's economy has suffered from deflation for more than 15 years, since the late 1990s, with the yearon - year rate of change in the cpi being about zero or slightly negative. it seems that one of the reasons why it has been taking time for the deflationary mindset to be dispelled in japan is that households and firms have been adaptive to the deflationary environment. given this, i believe it is important that the bank demonstrate its unwavering determination through such a commitment so that the perception that prices of goods and services are supposed to go up every year by around 2 percent becomes firmly entrenched among people. the second component is " yield curve control " in which the bank controls short - term and longterm interest rates. in the current framework, it sets the short - term policy interest rate and the target level of the 10 - year japanese government bond ( jgb ) yields as its operating targets. at present, in the guideline for market operations, the bank sets the short - term rate at minus 0. 1 percent and the target level at around 0 percent, and conducts jgb purchases so as to achieve this target level. almost a year has passed since the bank introduced qqe with yield curve control. under this framework, the yield curve has been formed smoothly so far in a manner consistent with the guideline for market operations. since the introduction of qqe in 2013, the basic transmission channel of monetary easing has been the reduction in real interest rates, and the current framework - - qqe with yield curve control - - is designed to amplify monetary easing effects when the outlook for economic activity and prices improves. in that case, there

is that japan's economy is expanding moderately, with a virtuous cycle from income to spending operating. in fiscal 2017 to date, the bank has revised its economic 1 / 6 bis central bankers'speeches assessment upward twice. these revisions are based on its judgment that a positive output gap has taken hold, as evidenced by the fact that industrial production has been on an increasing trend, reflecting the increases in demand both at home and abroad, and that labor market conditions have continued to tighten steadily. on the domestic demand side, business fixed investment has been on a moderate increasing trend, with corporate profits and business sentiment improving and across a wider range of industries. according to the june 2017 tankan ( short - term economic survey of enterprises in japan ), business plans for fiscal 2017, especially those of large enterprises, showed firms'solid stance. this is evidenced by, for example, the fact that fixed investment on a basis close to gdp definition saw a year - on - year increase of 5. 9 percent - - a level clearly exceeding the past average of 4. 3 percent for the june tankan surveys during the period of fiscal 2004 - 2016. private consumption has increased its resilience against the background of steady improvement in the employment and income situation, and housing investment has been more or less flat. exports have been on an increasing trend against the backdrop of developments in overseas economies that i mentioned earlier. on the price front, the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food is in the range of 0. 0 - 0. 5 percent. 2. outlook i will now look at the outlook for japan's economy during the projection period, which covers from fiscal 2017 through fiscal 2019. the economy is likely to continue its moderate expansion. domestic demand is likely to follow an uptrend on the back of highly accommodative financial conditions and fiscal spending through the government's large - scale stimulus measures. exports are expected to continue their moderate increasing trend along with the improvement in overseas economies. reflecting this outlook, japan's economy is likely to maintain growth at a pace above its potential mainly through fiscal 2018. in fiscal 2019, it is expected to continue expanding, although the growth pace is projected to decelerate due to a cyclical slowdown in business fixed investment and the effects of the scheduled consumption tax hike. looking at the medians of the policy board members'forecasts in the july 2017 outlook report