- year rate of increase in consumer prices at one point exceeding 10 percent in the euro area and reaching 9 percent in the united states. by contrast, the inflation rate in japan peaked at around 4 percent. while the federal reserve and the ecb rapidly raised policy rates to contain the inflation, the bank of japan has maintained monetary easing and continued to support the economy. recently, the recovery in the euro area economy has slowed moderately. the u. s. growth surprised many by staying firm despite the rate hikes. japan's recovery has remained moderate. what we have heard from japanese firms on their pricing practices a key issue for japan now is if the current higher - than - the - target inflation will abate. chart 2 shows recent and forecasted inflation rates, one excluding the effects of fresh food price changes and the other excluding fresh food and energy. the former, which is closer to the actual makeup of household budgets, was at around 3 percent in fiscal year 2022 and is projected to stay around the level for fiscal years 2023 and 2024, exceeding the price stability target of 2 percent. the prices of food and other frequently purchased daily necessities are rising at even higher rates, making many households feel burdened by even more than the 3 percent rate may imply. this is a serious issue. on the other hand, until recently, it had been a prevailing norm that neither wages nor prices could rise. japan had worked for many years to break free from this, and simply returning to such a frozen state after the current high inflation comes down would not be a desirable outcome either. the bank aims to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases. such an outcome would require walking a fine line in which inflation decreases, but not too far. the japanese monetary policy faces multiple needs : addressing the current inflation, supporting the moderate economic recovery, facilitating a favorable environment for wage increases, and preventing the economy from reverting to a deflationary state. the bank is struggling to find a solution and this is by no means an easy task. in exploring a solution, we must examine various factors at home and abroad. today, let me focus on the question of how firms set prices and wages. changes in firms'wage - and price - setting behavior in recent years are a highly complex matter, but, at the risk of oversimplification, let me try to break them down into four stages ( chart 3 )

complex and exotic structures. all approvals are reviewed & approved under specific transactional approval process by the derivatives approval & review team ( dart ) at sbp. i know that some people would like to see this fast tracked and we have taken steps to do so. though the specific transactions approved thus far are more complex and include variations of cross currency swaps ( ccs ), irs with embedded option, etc, the total volume in derivatives is still very low. in fx options the pak rupee equivalent is merely 177 million and fras 9. 650 million and so forth. the numbers are still very small despite having grown substantially. the point of going through these statistics is to highlight that there is a lot of work to be done in this area. in conclusion, i would like to say that pakistan has phenomenal opportunities in what has been going on globally in terms of private capital flows in terms of the savings that exist due to reserve accumulation in the region. secondly, we have to be proud of what we have achieved but at the same time we need to remember that there is still a lot more to be done. there are emerging trends of the nexus being developed between the capital markets and the banking sector and other segments of the non - banking sector. however, it is merely a small fraction. moreover, there are clearly lots of lessons that can be drawn from international and regional experiences of how we can foster these interlinkages and safeguard these effectively with the appropriate regulatory framework. i believe with us moving towards basel ii, while also positioning ourselves at the central bank with better supervision of the joint conglomerates, we should be able to offer these safeguards and oversee things more effectively. so i would like to encourage this forum to deliberate more on how we can go about nurturing this and what further steps are needed to promote innovation in the markets. thank you very much.