. consequently, we were worried that this would negatively affect the underlying trend in inflation. in order to preempt the manifestation of this risk and maintain the momentum toward achieving the price stability target, we judged that it was necessary to further strengthen monetary easing at this juncture. in introducing “ qqe with a negative interest rate, ” we focused on two points. first, the introduction of a negative interest rate is an additional element that leaves the basic framework of qqe intact. that is, the bank will continue to push down the entire yield curve through largescale purchases of jgbs under qqe. in addition, it aims to create even more powerful easing effects by lowering the short end of the yield curve through the introduction of the negative interest rate policy ( slide 8 ). thus, quantitative easing and the negative interest rate are not inconsistent but instead complement each other. in designing the policy, we benefitted a great deal from the wisdom and experiences of those central banks in europe that have adopted a negative interest rate policy. simply transplanting the policy, however, was out of the question, since japan ’ s idiosyncratic circumstances need to be taken into account. specifically, in japan, reserves at the central bank are far larger than in europe and under qqe will continue to increase at an annual pace of around 80 trillion yen. to address the concern that a negative interest rate might impose an excessive burden on financial institutions and have an adverse effect on the functioning of financial intermediation, we adopted a multiple - tier system so that a negative interest rate is applied only to the marginal increase in excess reserves ( slide 9 ). this is a unique feature of our policy framework. the second important aspect of “ qqe with a negative interest rate ” is that it aims to provide scope for further monetary easing in terms of the “ interest rate ” dimension, in addition to the “ quantity ” and “ quality ” dimensions. if judged necessary, we are ready to take further actions in terms of “ quantity ” and “ quality, ” and we do not share the view that the bank ’ s asset purchases are approaching their limit. to further supplement these tools, the new policy adds an “ interest rate ” option to these two existing options, so that the bank can now pursue additional monetary easing measures in terms of three dimensions : “ quantity, ” “ quality, ” and “ a negative interest rate. ” the new policy framework will provide significant reinforcement to complete our

earthquake and irregular weather in summer. despite these circumstances, household sentiment showed resilience. i consider that one of the factors of this is likely to have been the tightening of labor market conditions ( chart 2 ). private consumption has shown some signs of improvement, driven by a moderate increase in employee income. on the back of tightening labor market conditions, a modest increase in employee income has been seen ( chart 3 ). in japan, the action of increasing annual wage levels by revising the pay table is referred to as " base up. " this is a general wage increase made across all employees, apart from wage increases due to promotion, based on age, and / or the number of working years. this is a practice that was introduced during the rapid economic growth period. however, from the late 1990s, firms stepped up their efforts to contain labor costs. as a result, most firms stopped using base up from the 2000s. meanwhile, in the wage negotiations in 2014 and thereafter, this practice has been widely resumed among firms for the first time in more than a decade. this year is the fourth one since such trends have been visible, but some are concerned that the results of the negotiations this year would be disappointing given that the year - on - year rate of change in the consumer price index ( cpi, all items less fresh food ) has been slow to increase recently, due mainly to the fall in energy prices. even so, now that employees'concerns are not over a wage cut, but rather how much wages will increase, we are at least heading in the right direction considering the fact that hardly anybody had talked about base up as an issue for nearly 20 years until a few years ago. private consumption has shown some signs of improvement recently, given household sentiment being supported and improved employee income. my impression is that a virtuous cycle from income to spending has been maintained in the household sector. however, there are the following points to consider : ( 1 ) wage increases are weak despite tightening labor market conditions, and ( 2 ) consumption is rather lackluster despite the steady improvement in employee income. that is to say, consumption has shown some signs of improvement but has lacked momentum. therefore, the virtuous cycle from income to spending should become a little more promising. 2. corporate sector corporate profits have been at record high levels, but firms have been taking a cautious view on the outlook. corporate profits in japan reached record highs from fiscal 2013 through fiscal 2015, and have remained at