bank of england ( boe ), as shown in chart 1. a. adoption of a 2 percent inflation target first, all four central banks have adopted a medium - term inflation target or a numerical definition of price stability with a 2 percent, or close to 2 percent, convergence : their monetary policy mandates all include price stability. these central banks use headline inflation as a reference to their inflation targets ( the harmonised index of consumer prices [ hicp ] for the ecb ; the consumer price index [ cpi ] for the boj and the boe ; and the price index for personal consumption expenditures [ pce ] for the federal reserve ). the federal reserve, the ecb, and the boj also officially use the core pce deflator, the core hicp, and bis central bankers ’ speeches the core cpi, respectively, as operational guides to examine the underlining price movements in monetary policy conduct. 1 the boe and the ecb were frontrunners in adopting price stability targets, and the current numerical targets were adopted in 2003, prior to the global financial crisis, while the federal reserve and the boj did so after the crisis in 2012 and 2013, respectively. regardless of whether an inflation - targeting framework is officially implemented, the practices adopted are similar for each of the four central banks. these practices include adopting a numerical inflation target with clear mandates, the release of medium - term forecasts on future inflation and economic growth ( generally for about three years ), the presence of a committee that independently determines monetary policy, and various accountability requirements on achieving the target. these central banks all make policy decisions to align their inflation forecasts with their specific inflation target over the medium term ( or medium to long term ). in other words, they conduct a so - called “ flexible inflation - targeting framework ” that is defined by professor lars e. o. svensson as monetary policy conduct that attempts to stabilize inflation around the inflation target and to stabilize the output gap around the sustainable level. namely, monetary policy should be conducted flexibly with the aim of achieving the inflation target by taking into account various possible disturbances and their impacts on economic growth. this means conducting monetary policy so that a central bank ’ s inflation forecast gradually approaches its target in the medium term and inflation meets the target as a medium - term average. this approach is embedded in the monetary policy framework of the federal reserve because of its explicit dual mandate of price stability and maximum employment. in recent years, the realized inflation

the pandemic were regressive, income inequality appears to have increased further, above its already increasing trend in some advanced economies. the fiscal burden for dealing with this issue has also increased. from an economic perspective, these structural changes may affect the potential growth rate, the natural interest rate, and the phillips curve. the structural changes may have implications for the effectiveness of monetary policy and the appropriate responses. central banks should therefore pay close attention to the changing economic structure and its potential impact on prices and the real economy. climate change responses the second frontier is climate change response, which has become a new domain for central banks. this is an area in which considerable effort has been made since the last conference. stimulating and wide - ranging discussions have taken place at international forums such as the network of central banks and supervisors for greening the financial system ( ngfs ). the bank of japan published its comprehensive strategy on climate change in july 2021. the bank also introduced its climate response financing operations and has been actively engaged in a wide range of initiatives, including research. in principle, it is the governments'industrial and fiscal policies that play the primary role in addressing climate change issues. however, it is also important to consider how to make use of market mechanisms to ensure the effectiveness of these policies. one example is the emissions trading systems introduced in the eu and elsewhere. in japan, national - level plans have been launched. the role of markets in evaluating firms'efforts to tackle climate change is also important. in this way, the market function can promote changes in firms'behavior. for example, the bank of japan's climate response financing operations make use of financial institutions'expertise in assessing firms in the area of climate change. the financing operations also require financial institutions to disclose relevant information as a condition for supplying funds. these measures have been designed to help use market discipline in an effective way. the role of central banks may be considered from the perspective of market initiatives, such as promoting the development of financial markets related to climate change. the transformation of the monetary system the third frontier is the transformation of the monetary system, induced by digitalization. many central banks are working on the issues surrounding central bank digital currency ( cbdc ). the bank of japan has been testing the technical feasibility of the functions and features required for cbdc. specifically, in april this year, the bank of japan moved from proof of concept phase 1, aimed at testing the basic functions of cbdc, to proof of concept phase