masaaki shirakawa : the bank of japan ’ s efforts toward overcoming deflation speech by mr masaaki shirakawa, governor of the bank of japan, at the japan national press club, tokyo, 17 february 2012. * * * introduction it is a great honor for me to have the opportunity to speak to you today at the prestigious japan national press club. this is my third time speaking here, having initially done so in may 2008 – my first public speech after becoming governor of the bank of japan – and then again in may 2010, around the time when the european debt problem triggered by the crisis in greece started to overshadow the global financial markets. given that today happens to be just a few days after the bank implemented measures to further enhance monetary easing, this is my first opportunity to provide a thorough explanation of this latest policy decision. the previous two speaking events before the club were valuable opportunities for me, because they resulted in my being presented with many thought - provoking opinions and questions and provided the chance to put my own thoughts in order. with that in mind, i really look forward to exchanging views with you after delivering my speech. as i have just mentioned, the bank decided the following three measures this week, at the monetary policy meeting on the 14th, with a view toward clarifying its monetary policy stance and to further enhance monetary easing in order to overcome deflation and achieve sustainable growth with price stability ( chart 1 ). first, the bank introduced a numerical expression of price stability in the form of “ the price stability goal in the medium to long term. ” second, as for its conduct of monetary policy for the time being, the bank stated that it will “ continue pursuing powerful monetary easing with the aim of achieving the goal of 1 percent in terms of the year - on - year rate of increase in the consumer price index ( cpi ) until it judges that the 1 percent goal is in sight. ” and third, the bank increased the total size of the asset purchase program introduced in the fall of 2010, from about 55 trillion yen to about 65 trillion yen, by adding another 10 trillion yen earmarked for the purchase of japanese government bonds ( jgbs ). today, i will first explain the aim of and thinking behind these decisions. in the second half of my speech, i will focus on the challenge of overcoming deflation, which is the goal of the aforementioned measures, and discuss the causes of deflation as well as our thinking on

bank of japan's october report of recent economic and financial developments1 bank of japan, 14 october 2003. * * * the bank ’ s view2 the foundation for a gradual recovery in japan ’ s economy is being laid, as the environment for exports and business sentiment have improved. with regard to final demand, housing investment remains sluggish and public investment is declining. private consumption also continues to be weak. meanwhile, business fixed investment is recovering gradually and net exports have recently started to increase somewhat. in response to these developments in final demand, corporate profits are following a moderate uptrend and business sentiment is improving, although industrial production is still basically flat. meanwhile, the number of employees has stopped falling and the pace of decline in wages is gradually slowing. however, the employment and income situation of households overall still remains severe, as the unemployment rate continues to be high, albeit with some fluctuations. turning to the economic outlook, overseas economies are expected to maintain a relatively steady recovery mainly in the united states and in east asia. under these circumstances, it is likely that exports will continue to increase and industrial production will turn up gradually. with respect to domestic demand, public investment is projected to follow a declining trend, and private consumption is likely to remain weak for some time since the employment and income situation is unlikely to improve markedly. meanwhile, the recovery trend in business fixed investment is expected to become clearer, mainly in large manufacturing firms, whose investment has been thus far significantly restrained despite the recovery in their profits. overall, with the recovery in overseas economies, exports and production will increase, which in turn will gradually initiate momentum for an economic recovery in japan. however, it is expected to take some more time before a self - sustaining recovery in domestic demand gains momentum, given persisting downward pressures from structural adjustments, such as firms ’ reduction of excess debt and restraint on labor costs. in addition, uncertainty still exists with respect to the outlook for the environment for exports, as the employment situation in the united states continues to be sluggish and the yen exchange rate has been unstable, tending toward appreciation against the u. s. dollar. on the price front, import prices have stopped declining due to the uptrend in international commodity prices, especially crude oil prices, until this summer. under these circumstances, domestic corporate goods prices are more or less flat, which is also partly due to the rise in tobacco tax. meanwhile, corporate services prices continue a year - on - year decrease of slightly over