upon the introduction of qqe. compared to the united states and europe, inflation expectation formation in japan is judged as being largely adaptive, meaning that the expectations are formed in accordance with developments in the observed inflation rate. against this background, reflecting a substantial fall in crude oil prices since summer 2014 and a slowdown in emerging economies from 2015 through 2016 accompanied by turbulence in the global financial markets, the observed inflation rate declined, dragging down inflation expectations as well. the bank aims to drastically convert the deflationary mindset entrenched among people and re - anchor inflation expectations at 2 percent, but this has met with difficulties. given that qqe is unprecedentedly powerful, due attention also has to be paid to side effects that could materialize going forward. if an excessive decline in and a flattening of the yield curve were to last for too long under powerful monetary easing, risks of a pullback in financial intermediation and of destabilizing the financial system through downward pressure on financial institutions ’ profits could not be ignored. if these risks were to materialize, the transmission mechanism of monetary easing would be hampered and it would become more difficult to achieve price stability and sustainable economic growth in a self - fulfilling manner. it was judged that the bank has to achieve the most appropriate interest rate level with a view to containing such side effects to the minimum. bearing these issues in mind, the bank introduced “ qqe with yield curve control ” last september. this new policy framework was established through a further evolution of qqe, consisting of mainly two components ( chart 7 ). the first is yield curve control, which was introduced with the aim of realizing the combination of the levels of interest rates that are deemed most appropriate for maintaining the momentum toward achieving the price stability target of 2 percent, while also considering the effects on the functioning of financial intermediation. under this framework, japan ’ s yield curve during this one year has been formed smoothly in a manner consistent with 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 jgb yields at around zero percent. the second component is an inflation - overshooting commitment, which aims at ensuring that inflation expectations will be anchored at 2 percent. this is a further powerful commitment by the bank ; namely, it is committing itself to expanding the monetary base until the year - on - year rate of increase in the observed

ranee jayamaha : policy framework for regional cooperation and the role of the central banks speech by dr ranee jayamaha, deputy governor of the central bank of sri lanka, at the central bank of sri lanka, colombo, 6 july 2007. * * * thank you for this opportunity to share some thoughts on the need for cooperation to develop a regional payment initiative and the role of the central banks in that endeavour. 1. background as articulated by the governor, the saarc region ’ s trade and financial services are developing at a faster rate, with india achieving a rapid growth of around 8 - 9 %. most of the saarc group of countries, including india, have opened up or are considering to open their capital accounts in keeping up with global trends and the regional needs. accordingly, trade and investment flows and demand for financial services will exceed the present levels over the next couple of years. hence, payment system gains much importance as it is a critical facilitator in cross - border flows, as well as domestic transactions. it should be able to cater not only to the present needs, but also the future demands. for purposes of this presentation, the payment system is treated in a broader sense to encompass the payments, clearing and settlement systems. at a national level, some of the saarc and acu countries have already reformed or are about to reform their payment systems to minimize risks and increase safety and efficiency, although the degree of such reforms vary widely. sri lanka, india and iran have completed their stage i payment reforms. pakistan is in the process of completing stage i, while the other saarc countries are now taking steps to modernize their payment systems. the maintenance of a safe, sound and efficient payment system is a responsibility of the central bank as many of our central banks have increased focus on wider financial system stability as one of their core objectives. in that context, central banks are called upon to coordinate payment initiatives at national, regional and global levels to ensure that there are appropriate mechanisms for smooth payment flows. 2. why payment systems are critical to regional development? payment services are highly integrated and interdependent systems comprising payers, payees, payment instruments, financial intermediaries, markets, service providers, technical infrastructure, legal and regulatory systems and organizational structures. the public policy objectives common to all stakeholders are to enhance public confidence, safety, integrity, access to finance and efficiency of payment systems. therefore, we need to facilitate cross border