generating inflation expectations. the need for a reversal of expectations through a change in policy regime is likewise inherent in the thinking behind the bank ’ s quantitative and qualitative monetary easing of today. indeed, macroeconomic policies initiated by takahashi have many similarities with the economic policies under prime minister shinzo abe ; namely, the first and second “ arrows ” of “ abenomics. ” it is for this reason that the takahashi economic policy is viewed as playing a pioneering role in abenomics. the basic thinking behind the takahashi economic policy was to manage aggregate demand through both fiscal and monetary policies, and this coincided with keynesian principles. what is noteworthy about takahashi ’ s policy package is that it was put in place before keynesian economics became established. for instance, in the united states it was only from 1933 that president franklin d. roosevelt called for an exit from the gold standard, adopted a monetary easing policy, and introduced the new deal, which was considered to embody the essence of keynesian theory. by 1935, takahashi judged that japan ’ s economy had returned to a stable course. while tightening fiscal expenditure, he tried to stop the bank from underwriting government securities ; otherwise, this would lead to hyperinflation. his actions were opposed by the military, which sought a further expansion in military spending. he was eventually assassinated by young military officers on february 26, 1936. after his death, the bank ’ s underwriting of government securities was mismanaged, which led to hyperinflation after world war ii. the important point to remember is that it was not the takahashi economic policy itself but the mismanagement of the bank ’ s underwriting of government securities after takahashi ’ s death that led to hyperinflation. based on the lessons learned from history, subsequently the public finance act prohibited the bank from extending credit to the government by underwriting government securities. moreover, under quantitative and qualitative monetary easing, the bank has set its price stability target at 2 percent, based on the recognition that neither deflation nor hyperinflation is desirable. to conclude, the takahashi economic policy was consistent with economic theory and takahashi implemented his policy package expeditiously. it was indeed a successful macroeconomic policy of which japan should be proud, and his great achievement still stands as exceptional when compared with the contemporary episode of deflation that lasted for nearly 15 years. bis central bankers ’ speeches concluding remarks at today ’ s symposium, i understand that there will be a series

policy – which were put in place to respond to the showa depression of 1930 – 31. looking back at economic developments around that time, the 1920s were a period of persistent depression following the economic boom during world war i, the great kanto earthquake of 1923, and the showa financial crisis of 1927. then, in 1930, junnosuke inoue – finance minister under prime minister osachi hamaguchi – returned japan to the gold standard, lifting the gold embargo that had been in place since world war i. japan ’ s return to the gold standard meant a shift to a deflationary regime, with current deficits and price declines as a result of tight fiscal and monetary policies. in addition, in returning to the gold standard inoue set the exchange rate between gold and the yen at its former level, which was equivalent to excessive appreciation of the yen. all of this served to produce a deflationary recession in japan. in addition to these developments, the spillover of the great depression in 1929 into the domestic economy was regarded as the central cause of the showa depression. bis central bankers ’ speeches against this background, in 1931 takahashi assumed the post of finance minister for the fifth time in his career. under prime minister tsuyoshi inukai, he implemented a package of accommodative macroeconomic policies combining fiscal and monetary policies. this became known as the takahashi economic policy. on the first day of his return to office, he took the dramatic step of ordering an exit from the gold standard and a restoration of the gold embargo. as a result, foreign exchange rates became able to move in tandem with actual developments in the economy. in terms of fiscal policy, he increased fiscal expenditures, supporting the economy from the demand side. on the monetary policy front, the bank pursued accommodative measures by cutting its official discount rate and underwriting japanese government securities directly from the government. the takahashi economic policy – combining fiscal, monetary, and exchange policies effectively – led to the adjustment of the yen ’ s excessive appreciation and counteracted declining price levels. as a result, among the major world powers, japan became the first to succeed in achieving an economic recovery and escape from deflation during that period. the key to the takahashi economic policy ’ s success was a shift in economic policymaking from the deflationary regime of inoue to the reflationary one of takahashi. this overcame the public ’ s deflationary expectations,