until the condition is fulfilled. that means that the bank of japan's holdings of japanese government bonds ( jgbs ) keep increasing as well, because they provide a significant portion of the monetary base. by committing to an increase in the core element of monetary easing - - the monetary base - - the bank demonstrates that the unprecedented monetary easing will be firmly in place until the observed cpi inflation rate exceeds the price stability target of 2 percent and stays above the target in a stable manner. under our baseline scenario in which the inflation rate increases at a fairly moderate pace, a low - level yield curve will also continue until the condition is met along with an expansion of the monetary base. that said, if inflation were to accelerate suddenly, the bank would be able to address this by raising the short - and long - term interest rates. therefore, this commitment can be kept all the time, while giving powerful monetary stimulus. some economists raise concern that a higher inflation target, even though originally designed to lift inflation expectations, would end up being long - lasting, creating a new challenge of how high of an inflation rate level would be consistent with the legal mandate to achieve price stability. the bank of japan's new policy framework is constructed in such a way that it can avoid this problem while maximizing the monetary easing effects. the formation of inflation expectations and policy responses to lift inflation expectations are the subject of an ongoing debate. i strongly expect these issues to be further explored. iii. yield curve control next, i would like to talk about yield curve control. with regard to central banks'ability to control interest rates, the conventional view is that they can control short - term rates but not long - term rates. however, since the global financial crisis, major central banks, having faced the zero lower bound on short - term interest rates, have directly exerted influence on long - term interest rates through large - scale asset purchases. this policy is widely referred to as quantitative easing, or qe. in practice, all of the major central banks set the amount of asset purchases as an operating target, and long - term interest rates consequently are endogenously determined. however, the bank's analyses in the " comprehensive assessment " showed that the impact of government bond purchases by the bank on long - term interest rates has varied considerably depending on economic circumstances and financial market conditions from time to time. this means that, when the amount of government bond purchases is set as an operating target in advance, actual long -

domestic clearing capacity for essential euro - denominated clearing services. this would also facilitate rebalancing between domestic and offshore business if, for example, it was deemed more prudent in view of evolving risks in a host ccp. an adequate domestic clearing capacity helps to preserve financial stability within the eu and to ensure the smooth functioning of euro area markets. given the economic benefits of global liquidity pools, implementing the active account will require a carefully calibrated and phased approach. we understand the concerns raised. however, around 50 % of the eu clients that are not active in eu ccps are only active in euro - denominated trades, so crosscurrency pooling is not always the main issue. furthermore, although establishing an active account will not be without cost, it must also be acknowledged that eu stakeholders have a joint responsibility to establish a central clearing framework that is robust in periods of severe stress. disrupted access to critical clearing services during a financial crisis would have much greater financial risk implications than gradually moving part of the respective euro - denominated business to eu ccps. better preparedness for extreme stress events the second area in which further progress is required is our capacity to effectively address low - probability, high - impact types of risk. let me give two examples here. first, the current guidance on non - default loss risk [ 9 ] is much less developed than the guidance on risks related to participant default. this is despite the fact that the impact of non - default losses could be particularly significant, especially given that the resources available to cover such losses – mainly ccps ’ own capital – are limited. this became clear from the results of the fsb, cpmi and iosco analysis of ccp financial resources for recovery and resolution. while ccps are taking significant measures to mitigate non - default loss risk, this risk cannot be eliminated. therefore, arrangements for assessing and preparing for potential non - default losses are essential, and we support the cpmi - iosco initiative to further explore ccps ’ risk mitigants for non - default losses. second, there has been insufficient progress in terms of preparedness for events that, based on historical experience, would go beyond what could be considered extreme but still plausible. progress needs to be made, particularly in conceptualising such scenarios and embedding them in ccp recovery and resolution plans. while it is important to learn from past vulnerabilities – as has typically been the focus to date – we