deflation. against this background, the adoption of the 2 percent target in january 2013 was very important since it meant that these problems were finally eliminated. furthermore, from the beginning of my appointment as a member of the policy board, i have consistently advocated that medium - to long - term inflation should be well above 1 percent. therefore, i regard the adoption of the 2 percent target as a major achievement in the history of the bank ’ s conduct of monetary policy. why was the 2 percent value appropriate? now, some of you may wonder why 2 percent was chosen as the medium - to long - term target. conceptually, price stability should refer to a situation of zero inflation or no change in general prices. why then should the bank need to seek higher inflation? the main reason is that, as explained in section ii, 2 percent is a widely shared goal among many central banks in advanced economies as the medium - to long - term inflation target. the next question is thus why central banks should choose the value of 2 percent. it reflects the fact that central banks commonly believe it important to avoid the aforementioned zero lower bound situation, in which there is limited opportunity for a further decline in the policy rate. this approach was taken because the bank wished to underline the difference from the quantitative monetary easing ( qe ) policy adopted from 2001 to 2006, and it also reflects some lessons learned during that experience. under qe, the size of reserve deposits – namely, the " quantity " of the liability of the bank – was placed as the primary operational target ; monetary easing was thus strengthened by expanding this quantity. regarding the differences between qe and cme, please refer to my speech entitled " japan's monetary policy in a challenging environment, " speeches at the bank of italy and the eurasia business and economics society conference held in rome, bank of japan, 2013. bis central bankers ’ speeches global discussions on the 2 percent target for your reference, i would like to briefly introduce recent global - level discussions on this issue. in 2010, dr. olivier blanchard, economic counsellor and director of the research department of the international monetary fund ( imf ), pointed out that the u. s. economy had been facing the zero lower bound since the global financial crisis began in 2008 and that it was proving costly. if the u. s. economy had begun with higher average inflation and thus higher short - term nominal interest rates when entering the recession, the federal reserve could have lowered the interest

long - term inflation expectations. bis central bankers ’ speeches converging to the 2 percent medium - to long - term inflation expectations a number of other advanced economies successfully lowered their medium - to long - term inflation expectations from the high levels in the 1990s, and those expectations gradually converged to more or less 2 percent. such a decline also coincided with a drop in actual inflation. there is a consensus among central banks that this phenomenon is closely associated with the establishment of central bank independence and the adoption of inflation targeting ( or a framework to emphasize price stability ). in the case of the united kingdom, for example, the bank of england ( boe ) adopted inflation targeting in 1992, with the initial target being set in the range of 1 – 4 percent. the target was subsequently changed to 2. 5 percent in 1997 and further to 2 percent in 2004. 2 chart 12 shows that the medium - to long - term inflation expectations in that country converged to around 2. 5 percent in the 1990s and have been around 2 percent since 2004. for the united kingdom and the united states, which have been successfully stabilizing those expectations at around 2 percent, the current view is that expectations should be maintained at the current stabilized level. this issue will be brought up again in section iii. given that inflation expectations remain low in japan, what the bank is trying to do is to raise those expectations toward around the 2 percent level, which is comparable to that of other advanced economies. in this process, the phillips curve could become steeper and shift upward as inflation expectations and firms ’ price - setting behavior change. iii. the previous comprehensive monetary easing ( cme ) and my proposal at the march mpm a. what is a nontraditional monetary policy? so far, i have explained the outlook for economic activity and prices as well as the new monetary policy, qqe. after listening to my remarks, you may wonder why the bank adopted qqe, which represents a drastic leap from the previously adopted cme. to understand the essence of qqe, it is necessary, i believe, to review the effectiveness and limitations of cme as well as the factors that contributed to adopting the 2 percent price stability target in january 2013 under cme. moreover, i should explain clearly what factors and thoughts led to my proposal at the march mpm and how they are related to qqe. that thinking was substantially influenced by my having received many inquiries and responses from a wide range of