delay the recovery of the emerging economies, particularly those in asia, mainly through the trade channel ( chart 6 ). meanwhile, although anxiety over crude oil prices marking a bottom has waned recently, uncertainty over both the demand and supply sides remains heightened ( chart 7 ). in addition, attention continues to be warranted on developments in the u. s. economy and the impact on global financial markets of expectations over the pace of future rate hikes by the federal reserve in reflection of the developments in the economy. europe faces uncertainty regarding such factors as the outcome of the debt problem in greece and other countries as well as the possibility of the united kingdom leaving the european union – so - called brexit. if these risks were to materialize, there is a possibility that firms ’ positive stance toward investing in physical and human capital might be restrained through the effects of business confidence, and this point continues to warrant attention. bis central bankers ’ speeches risks to prices one of the risk factors specific to prices is developments in medium - to long - term inflation expectations. the baseline scenario of the april 2016 outlook report assumes that, amid rises in observed inflation accompanied by wage increases, people ’ s inflation expectations will rise further and gradually converge to around 2 percent – the price stability target. however, the pace of any future increase in wages and inflation expectations is uncertain during a prolonged period of low energy prices and no visible rises in annual all - item cpi inflation. in this regard, the following factors indicate that progress is being made in terms of dispelling the deflationary mindset – that is, the entrenched view that wages will not rise : ( 1 ) the certainty that a base pay increase will be achieved for a third consecutive year in this year ’ s shunto and ( 2 ) the spread of wage increases to small firms. this progress is an encouraging change toward overcoming deflation. at the same time, this year ’ s base pay increase is viewed as being somewhat less than last year ’ s rise, mainly at large firms ; therefore, the pace of wage increases is not felt at present as accelerating. factors such as the slowdown in overseas economies and volatile developments in global financial markets since the turn of this year seem to have made firms hesitate to take one step forward. based on the fact that corporate profits remain at historical high levels and that labor shortages have been heightened under a “ full - employment ” condition, while the labor share remains below the long - term trend, wage increases may

improvements in foreign exchange settlement, and enhancing the framework for resolving cross - border failures of financial institutions must not be forgotten as well. concluding remarks already forty years ago, the nobel prize - winning economist sir john r. hicks predicted that in a globalized financial market “ a national central bank will no longer be a true central bank, ” but will become “ single banks in a world - wide system. ” whether we like it or not, this is clearly the direction we are heading. bis central bankers ’ speeches