much steeper. therefore, we need to double efforts and take action early on. as the central bank, the pbc will assess the impact of climate change on financial stability and monetary policy. we are looking at the possibility of including climate change factors in the stress test of financial institutions. in foreign exchange reserve investment, we will further increase the share of green bonds, limit investment in carbon - intensive assets, and incorporate climate factors into our risk management framework. meanwhile, we will encourage financial institutions to get prepared as early as possible and proactively deal with the climate challenge. the pbc has guided pilot financial institutions to measure the carbon emission and climate risks of their projects. besides, we are making quarterly green credit assessments of our banks and exploring the development of a national carbon accounting system and an evaluation system of green credit and green bond performance of financial institutions. 1 / 2 bis central bankers'speeches having said that, we still have more work to be done. for example, some asset pricing can ’ t reflect the negative externalities for the environment. this is possibly due to the inadequate information disclosure by firms and many industries not performing carbon pricing yet. therefore, we will request financial institutions to pursue an orderly and gradual green transition, putting safety first, making energy conservation a priority, and speeding up transition after adequately considering the lifespan and depreciation of existing infrastructures. the above two issues both call for international cooperation. there is broad consensus on the green transition in asia. major economies are already on the move. japan has issued green bond guidelines, south korea launched the “ green new deal ” last year, and indonesia, malaysia, the philippines, and singapore all have announced emission reduction targets. regional cooperation is also gaining momentum. under the executives ’ meeting of east asia and pacific central banks ( emeap ), we are discussing the investment in local green bonds through asian bond fund ( abf ). under asean + 3 finance process, we are studying green and sustainable infrastructure financing. recently, asean finance ministers and central bank governors decided to set up a green financial classification standards committee to develop a multi - tier green financial classification system tailored to local needs. all this reflects the strong demand for green transition and huge potential for cooperation in asia. strengthening international cooperation will promote green finance in asia. resumed under the italian g20 presidency this year, the g20 sustainable finance study group has been upgraded to a working group. from our perspective, two major tasks require continuous efforts. first, we

prices will not increase easily has been entrenched. recently, many analyses show that households'inflation expectations are significantly affected by their experience for a long time. for example, compared to the age group who experienced relatively high inflation, inflation expectations are lower for younger generations in japan. they only have the experience of low inflation and deflation. 3 the second hypothesis is that the past experience of deflation and recent technological innovation have constrained the unit labor cost and this mechanism has worked strongly. even though the unemployment rate has declined to about 2. 5 percent and the tightening of labor market conditions has been evident, wage growth for regular employees has remained moderate. because of the long experience of a severe employment situation under deflation, both labor and management may have come to prioritize the stability of long - term employment over immediate wage increases. 4 in fact, wages of part - time workers, whose employment can be adjusted more flexibly, have been increasing by more than 2 percent, while those of regular workers increasing by less than 1 percent. in addition, the unit labor with regard to the characteristics of households'inflation expectations by generation in japan, see jess diamond, kota watanabe, and tsutomu watanabe, " the formation of consumer inflation expectations : new evidence from japan's deflation experience, " carf working paper, carf - f - 388, 2017. regarding the effects of the past employment situation on the present wage - setting stance, see yuto iwasaki, ichiro muto, and mototsugu shintani, " missing wage inflation? : estimating the natural rate of unemployment in a nonlinear dsge model, " imes discussion paper series, no. 2018 - e - 8, 2018. cost is constrained by offsetting a rise in labor cost with an improvement in productivity. since the it investment using the recent digital technology is highly substitutable to labor, it may constrain a rise in real wages ( chart 4 ). in addition to the two factors that i explained, there are many others, including the progress in globalization. various factors are interacting with each other and working on prices. for example, when households strongly believe that prices will not increase easily, firms may become cautious about raising their prices for fear of losing their customers, and thereby try to constrain the unit labor cost or markup. reflecting these various factors, the phillips curve in japan has flattened, and it has taken time for the