delay the recovery of the emerging economies, particularly those in asia, mainly through the trade channel ( chart 6 ). meanwhile, although anxiety over crude oil prices marking a bottom has waned recently, uncertainty over both the demand and supply sides remains heightened ( chart 7 ). in addition, attention continues to be warranted on developments in the u. s. economy and the impact on global financial markets of expectations over the pace of future rate hikes by the federal reserve in reflection of the developments in the economy. europe faces uncertainty regarding such factors as the outcome of the debt problem in greece and other countries as well as the possibility of the united kingdom leaving the european union – so - called brexit. if these risks were to materialize, there is a possibility that firms ’ positive stance toward investing in physical and human capital might be restrained through the effects of business confidence, and this point continues to warrant attention. bis central bankers ’ speeches risks to prices one of the risk factors specific to prices is developments in medium - to long - term inflation expectations. the baseline scenario of the april 2016 outlook report assumes that, amid rises in observed inflation accompanied by wage increases, people ’ s inflation expectations will rise further and gradually converge to around 2 percent – the price stability target. however, the pace of any future increase in wages and inflation expectations is uncertain during a prolonged period of low energy prices and no visible rises in annual all - item cpi inflation. in this regard, the following factors indicate that progress is being made in terms of dispelling the deflationary mindset – that is, the entrenched view that wages will not rise : ( 1 ) the certainty that a base pay increase will be achieved for a third consecutive year in this year ’ s shunto and ( 2 ) the spread of wage increases to small firms. this progress is an encouraging change toward overcoming deflation. at the same time, this year ’ s base pay increase is viewed as being somewhat less than last year ’ s rise, mainly at large firms ; therefore, the pace of wage increases is not felt at present as accelerating. factors such as the slowdown in overseas economies and volatile developments in global financial markets since the turn of this year seem to have made firms hesitate to take one step forward. based on the fact that corporate profits remain at historical high levels and that labor shortages have been heightened under a “ full - employment ” condition, while the labor share remains below the long - term trend, wage increases may

haruhiko kuroda : outlook for japan ’ s economy and challenges to achieving the price stability target of 2 percent speech by mr haruhiko kuroda, governor of the bank of japan, at a meeting held by the naigai josei chosa kai ( research institute of japan ), tokyo, 13 may 2016. * * * introduction it is my great honor to have the opportunity to address you today at the naigai josei chosa kai. i would like to express my sincere condolences to the victims of the kumamoto earthquake and offer my heartfelt sympathies to those who are suffering. the bank of japan continues to provide its central banking services seamlessly following the earthquake – including the supply of cash and business operations at teller windows in its kumamoto branch as well as the operation of the bank of japan financial network system ( boj - net ) used for funds settlement among banks – and is making efforts to maintain the financial infrastructure. with the support and cooperation of relevant parties, most of the branches of the financial institutions in the disaster area have been able to resume their operations, and the financial and settlement systems there are functioning in an organized manner. at the monetary policy meeting ( mpm ) held in april 2016, the bank decided to introduce a funds - supplying operation for financial institutions in disaster areas affected by the kumamoto earthquake at a total loan amount set at 300 billion yen, with a view to supporting them in their efforts toward meeting demand for funds for restoration and rebuilding. this operation will surely contribute to backing the restoration and rebuilding. the bank introduced “ quantitative and qualitative monetary easing ( qqe ) with a negative interest rate ” at the january 2016 mpm. since the turn of the year, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity - exporting economies, particularly the chinese economy. meanwhile, there was an increasing risk that an improvement in the business confidence of japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected. in order to preempt the manifestation of this risk and to maintain momentum toward achieving the price stability target of 2 percent, the bank judged it necessary to implement an extremely powerful policy scheme. in fact, following the introduction of “ qqe with a negative interest rate, ” the policy effects on interest rates already