by capital - constrained banks. operationally, this is typically done by feeding our stress test results into some of our largescale macro models that include an active banking sector and thus can adequately capture the real - financial linkages. nonetheless, further modelling enhancements are warranted in this fourth building block, and for this purpose we will continue to closely monitor the progress in the tools developed in workstreams 1 and 3 of mars. having described the various building blocks, let me furthermore emphasise that our framework is based entirely on publicly available consolidated bank - level data ; no supervisory information is employed in our set - up. bis central bankers ’ speeches our analytical framework should also not be mistaken for the constrained “ bottom - up ” approach adopted by the eba for its annual eu - wide stress test. the eba stress testing exercise is carried out at the bank level and applying granular bank level data only available to the banks and their national supervisors. compared with supervisory stress tests carried out between banks and their home supervisors, the eba bottom - up stress test is “ constrained ” in the sense of using a common scenario across all banks and to a large extent also relies on common methodologies. bottom - up and top - down stress tests should not be directly juxtaposed, as a one - to - one mapping of their results is not possible. rather they should be seen as complementary tools to assess the resilience of the financial sector ; they are characterised by different strengths and weaknesses. importantly, although top - down stress tests are far from perfect and suffer from many deficiencies, they are a useful tool to challenge the more granular bottom - up approaches and especially to detect outlier responses by individual banks in the latter case. 3. the use of macro - prudential policy instruments in the single market i would like to conclude by turning to the design of policy instruments that authorities may use to address the risks identified by various analytical tools. as a consequence of the lessons learned from the crisis, the focus of financial regulation has gradually shifted towards a macro - prudential approach, a key element of which is the establishment of authorities with macro - prudential mandates at both the national and the international level. in the eu context, the esrb has been operational since the beginning of this year. the esrb is currently working on developing a macro - prudential toolkit of policy instruments that authorities can use to address systemic risks. moreover, the basel iii regulatory framework

, 2015 represented the second consecutive year of base pay increasing, and movements toward wage increases have continued to be seen in various sectors this year. what these indicators and developments suggest is that firms ’ price - and wage - setting stance has clearly changed and that households seem to be increasingly accepting price rises. against this backdrop, price hikes by firms have been widespread and sustained. inflation expectations therefore appear to be rising on the whole from a somewhat longerterm perspective and it can be assessed that conversion of the deflationary mindset has been progressing steadily thus far. bis central bankers ’ speeches i have just explained the recent developments and outlook for the underlying trend in inflation. i would now like to give an overview of the bank ’ s projections for the cpi ( all items less fresh food ) in the january 2016 outlook report ( chart 3 ). in brief, the forecasts of the cpi ( all items less fresh food ) are obtained by adding the underlying trend in inflation to the contribution of energy items to the cpi. the january outlook report assumes that dubai crude oil prices will rise moderately from the recent 35 u. s. dollars per barrel to the range of 45 – 50 dollars per barrel toward the end of fiscal 2017, which marks the end of the projection period. the contribution of energy items to the year - on - year rate of change in the cpi ( all items less fresh food ) is estimated to be slightly more than minus 1 percentage point and is at its highest level recently. however, under the aforementioned assumption of crude oil prices, the contribution is projected to decrease gradually. meanwhile, since the underlying trend in inflation is likely to rise steadily, this is likely to be seen clearly in the cpi ( all items less fresh food ) as the contribution of energy items to the cpi lessens. taking these factors into account, the year - on - year rate of change in the cpi ( all items less fresh food ) is projected to reach around 2 percent – the price stability target – around the first half of fiscal 2017. iii. risk factors regarding the outlook for economic activity and prices thus far, i have explained the outlook for economic activity and prices that the bank considers most probable. the baseline scenario assumes that japan ’ s economy is likely to be on a moderate expanding trend and the year - on - year rate of change in the cpi is likely to accelerate toward 2 percent. however, there are various risks associated with this outlook. in the following, i would like to touch on two important factors