long as it is necessary for maintaining that target in a stable manner. the other feature is large - scale monetary accommodation to underpin the commitment. in introducing qqe, the bank decided to double the monetary base – the money it directly provides – in two years and, to achieve this, the bank would purchase massive amounts of japanese government bonds ( jgbs ), including bonds with longer remaining maturities. the bank expects qqe to work via several transmission channels, and of these channels, raising inflation expectations is of particular importance. the salient feature of qqe is that it seeks to actively influence expectation formation. not only is raising inflation expectations in and of itself critical in overcoming deflation, it also provides room for further monetary easing. at the time of introducing qqe, 10 - year interest rates were below 1 percent and there was limited room for further reduction in nominal interest rates in japan. but it is real interest rates – nominal interest rates minus the expected rate of inflation – that affect decisions with regard to business fixed investment and private consumption. while there was little room for lowering nominal interest rates in japan, there was sufficient room for raising the expected rate of inflation, since it was quite low compared with the price stability target of 2 percent. therefore, if the bank can raise inflation expectations while keeping increases in nominal interest rates smaller than the rise in inflation expectations by putting downward pressure on nominal interest rates through large - scale purchases of government bonds, then real interest rates will decline. this will stimulate the real economy. monetary policy in japan, the united states, and europe next, let me compare monetary policy in japan with that in the united states and europe since the global financial crisis. the first thing to note is that monetary policy in the united states and europe since the global financial crisis has been quite similar to the monetary policy pursued by the bank since the 1990s. that is, central banks responded to the crisis by lowering policy rates as long as there was room for that ( chart 3 ). after reaching the zero lower bound, many central banks adopted policies to expand their balance sheets ( chart 6 ). bis central bankers ’ speeches however, since the economic and inflation situation in the united states and europe differs from that in japan, the challenges for monetary policy naturally differ. although the economies of the united states, the united kingdom, and the euro area are on a recovery trend, there does remain considerable slack in these economies, as seen in the still - high unemployment rates

( chart 7 ). in the jargon, the output gap remains negative. on the other hand, while actual inflation has been declining, medium - to long - term inflation expectations in these economies appear to have remained more or less anchored at about 2 percent ( chart 8 ). given this economic and inflation situation, the challenge for monetary policy is how to stimulate the economy and lower the unemployment rate while keeping inflation expectations unchanged. by contrast, in japan, the unemployment rate has declined to 3. 5 percent, which is below the trough prior to the global financial crisis, and there is limited slack in the economy. on the other hand as i have explained, under 15 years of deflation, deflationary expectations became entrenched and medium - to long - term inflation expectations drifted down to a very low level. in such a situation, the policy challenge for us is how to raise inflation expectations. taking this challenge into account, qqe focuses on directly working on inflation expectations. meanwhile, switzerland has been facing a challenge that differs from that in the united states, the united kingdom, the euro area, and even japan. switzerland has seen a decline in inflation as a result of a decline in import prices due to the appreciation of the swiss franc. therefore, the swiss national bank ( snb ) set a ceiling for the swiss franc against the euro, stating that it would enforce the ceiling with unlimited interventions. the fact that the ratio of the snb ’ s balance sheet to nominal gdp is higher than that of the bank of japan ’ s reflects the increase in its holdings of foreign currency denominated assets under this policy. iii. achievements under one year of qqe developments in the past year more than one year has passed since the bank introduced qqe. during this time, qqe has produced its intended effects, with japan ’ s economy on track to achieving the 2 percent price stability target. under the bank ’ s large - scale purchases of government bonds, long - term interest rates have been stable at a low level and have recently been below 0. 6 percent ( chart 9 ). inflation expectations judged from break - even inflation rates calculated from the yield of inflation - indexed bonds and various surveys have been rising ( chart 10 ). as a result, real interest rates have declined, thereby stimulating private demand. against this backdrop, the virtuous cycle among production, income, and expenditure has kept the growth momentum intact and japan ’ s economy has continued