february 6, 2020 bank of japan economic activity, prices, and monetary policy in japan speech at a meeting with business leaders in nara masai takako member of the policy board ( english translation based on the japanese original ) i. developments in economic activity and prices i would like to start my speech with a look at developments in economic activity and prices. following the discussion at the monetary policy meeting ( mpm ) held in january 2020, the bank of japan published the outlook for economic activity and prices, or the outlook report. in this report, the bank presented its projections for japan's economic activity and prices from fiscal 2019 through fiscal 2021. i will explain developments in economic activity and prices by presenting the main content of the outlook report. a. overseas economies let me first touch on the current situation for overseas economies. the bank assesses that they have been growing moderately on the whole, although slowdowns have continued to be observed. downside risks concerning overseas economies seem to be still significant. however, i feel that they have eased somewhat recently, mainly reflecting progress in the u. s. - china trade negotiations and in the united kingdom's exit from the european union. this view seems to be shared among, for example, international organizations, as evidenced by the world economic outlook ( weo ) update released in january 2020 by the international monetary fund ( imf ), in which the imf assessed that the balance of risks to the global outlook remained on the downside but was less skewed toward adverse outcomes than in october. 1 in terms of the outlook for overseas economies, although it will take some time for the growth pace to pick up, they are expected to grow moderately on the whole, with the growth rates rising on the back of the materialization of the effects of macroeconomic policies in each country as well as a pick - up in the manufacturing sector, due mainly to the global cycle for it - related goods shifting toward a phase of improvement. according to the january 2020 weo update, the growth rate of the global economy is projected to pick up see https : / / www. imf. org / en / publications / weo / issues / 2020 / 01 / 20 / weo - update - january2020. gradually to around 3. 4 percent - - about the same level as the past average - - in 2021, led by emerging economies, amid continued accommodative financial conditions. in fact, there seem to be signs of recovery

remaining positive and medium - to long - term inflation expectations rising. the medians of the policy board members'forecasts of the year - on - year rate of change in the cpi for all items less fresh food presented in the january 2020 outlook report was 0. 6 percent for fiscal 2019, 1. 0 percent for fiscal 2020, and 1. 4 percent for fiscal 2021. 3. risks to prices i now would like to talk about two points that i consider risks to the baseline scenario of the outlook for prices. the first point is future developments in real wage growth. from a long - term perspective, wages and prices generally have moved in tandem with each other. in fact, households'tolerance toward price rises has started to increase, albeit at a moderate pace, on the back of the improvement in the employment and income situation. i consider it necessary that these positive developments further gain momentum on the back of a greater increase in real wages in order to maintain the bank's baseline scenario. the second point is developments in foreign exchange rates and international commodity prices. i still consider these to be risks since they not only directly affect prices but also may adversely affect business and household sentiment. ii. the bank's monetary policy next, i will talk about the bank's monetary policy. a. current monetary policy framework the bank has set the price stability target at 2 percent in terms of the year - on - year rate of change in the cpi and is conducting the current framework of quantitative and qualitative monetary easing with yield curve control to achieve this target at the earliest possible time. specifically, it sets the short - term policy interest rate at minus 0. 1 percent and the target level of 10 - year japanese government bond ( jgb ) yields at around 0 percent in the guideline for market operations, and has been taking measures such as jgb purchases to achieve the target levels. the bank has thus supported the economic activity of firms and households by maintaining highly accommodative financial conditions. regarding the conduct of monetary policy, the bank has demonstrated its stance to decide on monetary policy that is considered most appropriate, taking account of developments in economic activity and prices as well as financial conditions at the time in a comprehensive manner. in particular, since summer 2019, in a situation where downside risks to economic activity and prices, mainly regarding developments in overseas economies, have been heightening, the bank has further clarified its intention by clearly demonstrating the policy stance of being tilted toward monetary accommodation