distinguishing whether an extension of the period for maintaining the current accommodative monetary policy is, for example, ( 1 ) the result of more pessimistic forecasts by a central bank on prices and economic activity or ( 2 ) the result of a more accommodative policy. the former may discourage aggregate demand while the latter may promote aggregate demand. the state - contingent approach may help to distinguish between these two cases. in relation to economic conditions ( or thresholds ), forward guidance can focus solely on prices or can include a wide set of economic variables ( e. g., the unemployment rate ). the different forms here reflect ( 1 ) the presence of other mandates given to the central bank, such as the dual mandate in the case of the federal reserve ; ( 2 ) the specific environment surrounding monetary policy at the time ( e. g., whether current inflation trends are above or below the inflation target ) ; and ( 3 ) the detailed measures adopted ( e. g., policy interest rate, asset purchases, or a combination of both ). the most important point i wish to highlight here is that the degree of details contained in the description of forward guidance can vary over time. it can be refined over time as economic recovery becomes firm, by giving more specific information about the duration of monetary accommodation or the economic conditions. b. forward guidance in japan let me now focus on forward guidance in japan. the bank has a long history of practicing communication strategy to generate monetary easing under the zero lower bound. there are a number of empirical analyses pointing to the effectiveness of this policy in japan, particularly in regard to the impacts on financial markets. 5 forward guidance also constitutes an important element of qqe. i will first explain the forward guidance used under the current see, for example, bank of england, “ monetary policy trade - offs and forward guidance, ” 2013. see, for example, nobuyuki oda and kazuo ueda, “ the effects of the bank of japan ’ s zero interest rate commitment and quantitative monetary easing on the yield curve : a macro - finance approach, ” bank of japan working paper series, no. 05 - e - 6, 2005 ; hiroshi ugai, “ effects of the quantitative easing policy : a survey of empirical analyses, ” bank of japan working paper series, no. 06 - e - 10, 2006 ; and jouchi nakajima, shigenori shiratsuka, and yuki terani

baaack : japan ’ s slump and the return of the liquidity trap, ” brookings papers on economic activity, 1998 ( 2 ) ; 137 – 205 ; david reifschneider and john c. williams, ‘ ‘ three lessons for monetary policy in a low - inflation era, ’ ’ journal of money, credit and banking, 32 part 2, 2000 : 936 – 66 ; gauti b. eggertsson and michael woodford, “ the zero bound on interest rates and optimal monetary policy, ” brookings papers on economic activity, 2003 ( 1 ) ; 139 – 211 ; and michael woodford, “ methods of policy accommodation at the interest - rate lower bound, ” speech delivered at the 2012 economic policy symposium, federal reserve bank of kansas city, 2012. bis central bankers ’ speeches open - ended, calendar - based, and state - contingent forward guidance forward guidance can take various forms. for example, it can be applied solely to the policy interest rate or to a broader set of monetary stimulus measures including the policy rate and asset purchases. it can be categorized as open - ended, calendar - based, or state - contingent ( or threshold - based ). 4 open - ended guidance can refer to an abstract description of the monetary easing policy duration ( such as “ a considerable period ” or “ an extended period ” ) or of the economic conditions under which the accommodative policy will be maintained ( such as “ until deflationary concerns are dispelled ” ). calendar - based guidance uses specific date expressions for monetary easing, such as “ over the next six months. ” some people consider that calendar - based forward guidance is superior to open - ended forward guidance from a transparency and effectiveness perspective. state - contingent guidance provides a clear description of the economic conditions under which the accommodative policy will be maintained by using, for example, a threshold on the inflation outlook. when comparing calendar - based and state - contingent forward guidance, the state - contingent approach is regarded as being superior for two reasons. first, it provides assurance of a central bank ’ s intention to maintain its accommodative monetary policy even after economic recovery strengthens by introducing such specific expressions in the guidance. second, a clear description of the relationship between the conduct of future monetary policy and the economic conditions contributes to enhancing transparency and predictability in the eyes of the markets and the public. the major drawback of the calendarbased approach is the difficulty in