stance becomes more proactive, inflation expectations may not rise smoothly ; in other words, the second step of the mechanism may not operate fully. past experience suggests that there is a certain time lag before actual inflation affects inflation expectations and the length of this lag is highly uncertain. so far, there has not been enough academic literature on the learning process through which firms and households revise their inflation expectations upward when faced with actual price rises. taking into consideration that the experience of 15 years of deflation had become deeply entrenched in people's mindset and behavior, we need to keep in mind that it might take a fair amount of time before actual inflation starts to affect inflation expectations. thus, in a situation where there are various risks and uncertainty is high, with a view to making an assessment of the outlook for prices and being accountable for this, it would not be proper - - and not represent adequate information dissemination by the bank - - to attract excessive attention merely to forecast figures. as also highlighted by federal reserve chairman powell, it is difficult to make accurate forecasts about future economic developments, and too much emphasis should not be placed on the medians of board members'forecasts. regarding the timing of the year - on - year rate of change in the cpi reaching around 2 percent, up until the previous january 2018 outlook report, the bank provided specific descriptions such as that this would likely be around fiscal 2019 ; however, the latest report does not include such descriptions. the bank believes that giving a detailed and articulate explanation on price developments based on a comprehensive assessment - including the mechanism through which the year - on - year rate of change in the cpi increases toward 2 percent and the assessment of risks - - leads to more appropriate communication to the public. iii. the conduct of monetary policy let me now turn to the bank's conduct of monetary policy. the bank has been pursuing powerful monetary easing with a view to achieving the price stability target of 2 percent. specifically, under the framework of " qqe with yield curve control " introduced in september 2016, it facilitates the formation of the yield curve that is considered most appropriate for achieving the 2 percent target judged on the basis of developments in economic activity and prices as well as financial conditions. at the mpm held at the end of last month, the bank maintained the guideline for market operations, in which the short - term policy interest rate is set at minus 0. 1 percent and the target level of the 10 - year

the bank of japan ’ s january report of recent economic and financial developments bank of japan, communication, 6 / 2 / 98. summary japan ’ s economic growth remains stagnant. sluggish domestic demand, especially household expenditures, has been exerting negative influence upon production, employment and income. corporate sentiment has also weakened. with respect to final demand, net exports have continued to increase, and business investment has been rising moderately, mainly in the manufacturing sector. meanwhile, private consumption has continued to stagnate, reflecting cautious household sentiment that has persisted even after the rebound of the front - loading expansion of spending prior to the consumption tax hike had subsided. housing investment has continued to be weak and public - sector investment has been decreasing. reflecting the weak final demand, inventory adjustment pressures have been spreading, and industrial production has been on a slightly declining trend. the pace of improvement in employment and income conditions has also been slowing. thus, the positive growth cycle of production, income, and expenditures has stalled. as regards the outlook of the economy, external demand is expected to continue upholding the economic growth, and the special tax - cut measures announced in december 1997 are expected to have positive effects on household spending. overall, however, the economy is likely to remain stagnant for a while, due to the intensifying pressures of inventory adjustment, the continued decline in public - sector investment, and the anticipated deceleration in business fixed investment. given the slowdown in the pace of growth, the economy is considered to be vulnerable to further negative impacts. in these circumstances, the possibility of the emergence of further downside risks should be carefully observed, such as prolonged and intensified adjustments in the asian economies, more restrictive lending stance of financial institutions impeding corporate finance, or further deterioration of confidence in the corporate and household sectors. with regard to prices, wholesale prices have declined reflecting a slack in the supply and demand conditions of goods. meanwhile, consumer prices have remained at a level slightly above that of the previous year when observed excluding the effects of institutional changes such as the rise in the consumption tax rate. thus, prices on the whole remained stable. prices are likely to be steady in the immediate future, since downward pressures on prices are not as significant as was the case in 1995, when the yen ’ s appreciation induced a penetration of imports, which then directly dampened prices of import - competing domestic final goods, arousing concerns for a deflationary spiral in the economy. however