financial institutions ’ profits. however, i think it is of notable significance that the longheld belief that nominal interest rates cannot be negative was overturned, and that the idea evolved into an actual policy option. the fourth approach is reducing real interest rates by influencing people ’ s inflation expectations, instead of by cutting nominal interest rates. in the case of japan in particular, where deflation has persisted and the deflationary mindset has become entrenched among people, it is necessary to re - anchor medium - to long - term inflation expectations by exerting influence on people ’ s expectations. this will require the central bank ’ s strong commitment to achieving the inflation target, clear and consistent communication to the public, and determined actions to realize the commitment. let me now explain the bank of japan ’ s monetary policy after the global financial crisis, while bearing in mind the four measures composing the evolution of monetary policy to overcome the zero lower bound that i just mentioned ( chart 4 ). in response to the collapse of lehman brothers in 2008, the bank immediately reduced short - term policy interest rates, as did other central banks. as the pace of economic improvement remained sluggish, the bank in october 2010 decided to introduce the comprehensive monetary easing policy. specifically, it reduced the target level of short - term interest rates to 0 to 0. 1 percent and committed itself to maintaining the virtually zero interest rate level “ until it judges that price stability is in sight. ” in addition, it established the asset purchase program, through which it provided longer - term funds at a fixed rate and purchased various financial assets such as japanese government bonds ( jgbs ), corporate bonds, and exchange - traded funds ( etfs ). as these measures show, in order to overcome the zero lower bound, the bank affected longer - term interest rates through jgb purchases and forward guidance, and started to compress risk premiums through purchases of corporate bonds and etfs. in terms of the four approaches that i explained earlier, the bank adopted the first two. 5 / 15 bis central bankers'speeches although the bank continued to provide accommodative financial conditions through measures such as an expansion of the asset purchase program and strengthening of forward guidance, this did not result in a significant improvement in economic activity and prices. thus, the bank newly introduced an extremely powerful policy package in april 2013 — namely, qqe. under this framework, the bank shifted the main operating target from interest rates to the monetary base,

financial system in japan has regained stability mainly because financial institutions have mostly resolved their nonperforming - loan problems, and as a result financial institutions'precautionary demand for liquidity has declined substantially. the year - on - year rate of change in the cpi has become slightly positive recently, and therefore the policy commitment has to a significant extent lost its influence on the formation of longer - term interest rates. thus, the stimulative effects of the quantitative easing policy on economic activity and prices are coinciding with the effects of short - term interest rates being at practically zero percent. the effects of monetary easing are being amplified by low interest rates maintained during the improvement in economic and price conditions. given this situation, the bank will thoroughly examine economic activity and prices, and decide a change of the policy framework appropriately according to the commitment based on the cpi. conclusion japan's economy continues to recover steadily. the current economic expansion has lasted four years, since january 2002, based on the cabinet office's reference dates of business cycles. this already makes it the third - longest expansion phase in the post - world war ii period. as for the outlook, the economy is likely to experience a relatively long period of growth, albeit at a moderate pace, and the bank will continue its close monitoring of developments. the bank will also continue to examine the state of the economy in each region thoroughly through such means as research conducted by its branches. the bank conducts monetary policy to realize sustainable growth of the economy through the pursuit of price stability. the bank is determined to firmly support japan's economy from the financial side to achieve sustainable growth with price stability by maintaining an accommodative financial environment, based on careful examination of developments in economic activity and prices.