the market digesting its contents, there have been rises in the volatility of government bond yields. the bank has been having close dialogue more than ever with market participants and taking firm action, including an adjustment of the “ parameters ” of the jgb purchase operations. yesterday, the bank released the outline of the outright purchases of jgbs for the time being. specifically, it decided to increase the frequency of jgb purchases. while the amount to be purchased was left at approximately 7 + trillion yen per month in principle, it also decided to conduct such purchases in a flexible manner by taking account of market conditions in order to ensure that the effects of monetary policy permeate the economy. the bank expects that these measures will lead to the stable formation of long - term interest rates by suppressing excessive rise in interest rates and heightened volatility. bis central bankers ’ speeches ii. outlook for economic activity and prices and the importance of expectations let me next explain how the bank considers economic activity and prices will develop under quantitative and qualitative monetary easing. i will explain in line with the baseline scenario of the “ outlook for economic activity and prices ” released by the bank at end - april. first, the real economy. japan ’ s economy has started picking up. as for the outlook, japan ’ s economy is expected to return to the moderate recovery path around the middle of the year. on the back of that, domestic demand is expected to remain resilient and growth rates of overseas economies will gradually pick up. thereafter, the economy will be influenced by a last minute surge in demand and its reversal decline at two scheduled consumption tax hikes. despite that, with a virtuous cycle of production, income, and spending expected to be maintained, the economy is likely to continue growing above the potential growth rate of around 0. 5 percent as a trend. let me quote specific figures from the median of the policy board members ’ forecasts. the growth rate is projected to be 2. 9 percent for fiscal 2013, 1. 4 percent for fiscal 2014, and 1. 6 percent for fiscal 2015. on such growth rate projection, the output gap, which illustrates aggregate supply and demand balance, will gradually turn positive from the current level of about negative 2 percent. it will further widen to about 2 percent in the latter half of the projection period up to fiscal 2015. as for prices, the year - on - year rate of change in the consumer price index ( for all items excluding

fresh food ) has been negative. based on the economic projection i have just mentioned, it is expected to be on an uptrend. main factors behind that are an improvement in aggregate supply and demand balance and a rise in the expected rate of inflation. it is likely to reach the “ price stability target ” of about 2 percent through the latter half of the projection period up to fiscal 2015. specifically, the median of policy board members ’ forecasts was 0. 7 percent for fiscal 2013, 1. 4 percent for fiscal 2014, and 1. 9 percent for fiscal 2015. the bank ’ s clear commitment to achieving the price stability target and quantitative and qualitative monetary easing that underpins the commitment are expected to lead to a rise in prices through three routes. first, an improvement in aggregate supply and demand balance. when growth beyond the potential growth rate is achieved, aggregate supply and demand balance will improve and the positive output gap will widen. second, a rise in the medium - to long - term expected rate of inflation. the expected rate of inflation will be on an uptrend under quantitative and qualitative monetary easing and will gradually converge on the price stability target of about 2 percent. third, an increase in import prices. foreign exchange rate developments will put upward pressure on those prices for the time being. and on the assumption that international commodity prices will be on a moderate uptrend in tandem with the growth of the global economy, import prices are likely to continue rising. of the three, the important key to achieving the price stability target under the current policy is the second route, namely, to raise the medium - to long - term expected rate of inflation. let me explain the reason by using the so - called phillips curve, which shows the relationship between aggregate supply and demand balance and the inflation rate. as mentioned, when growth beyond the potential growth rate is achieved, the positive output gap widens. as the gap widens, the inflation rate will rise along the positive slope of the phillips curve. as deflation has continued for nearly 15 years, the phillips curve itself has shifted downward. and its slope has become moderate, due partly to a decline in firms ’ pricing power amid globalization. given such shape of the current phillips curve, the 2 percent price stability target cannot be achieved only by achieving a 2 percent positive output gap. one reason for the difference in the outlook for prices between the bank and private institutions might be that many private institutions have based their outlook on the