. to recover their financial strength, the disposal of npls - - a legacy of the past - - alone is not sufficient. they need to improve their profitability. to improve financial institutions'profitability in the long run, the financial institutions themselves need to establish new business models. i understand that this is easier said than done, but there seems to be room for further improvement. financial institutions should first identify areas where they have an advantage over other competitors, and develop a business strategy taking full advantage of their strong areas, and reallocate their business resources. business consolidation and reorganization through various measures such as mergers, establishment of bank holding companies, and business alliances have become common in the financial sector in the past few years. business reorganization is taking place in various different forms, such as mergers between financial institutions beyond the confines of their own corporate groups, integration of trust bank business and that of securities business within financial groups, and plans for super - regional banks. the most important thing is for financial institutions to find ways to take full advantage of business reorganization to reform their business management. i hope that financial institutions'efforts to improve their profitability will contribute to pushing forward both the disposal of npls and the corporate rehabilitation, and to revitalizing the financial system. the progress in npl disposal, corporate rehabilitation, and financial system revitalization will bring about positive synergy effects, such that markets'confidence in financial institutions will be restored, which in turn will have positive effects on stock prices. it cannot be denied, however, that it will take time for measures implemented by financial institutions to have positive effects. d. injection of public funds and the ending of the blanket guarantee on bank deposits as the disposal of npls progresses, we need to prepare for an emergency where concerns about the stability of the financial system as a whole are raised despite the efforts made by financial institutions. the amended deposit insurance law, which came into effect in april 2001, states that in such an event, the prime minister may, following deliberation by the council for financial crisis, acknowledge the necessity of injecting public funds. it is necessary to expeditiously advance the resolution process of financial institutions that cannot reconstruct their business. in addition to the injection of public funds by the government, if it is necessary from the viewpoint of maintaining the stability of the financial system, the bank will for its part fulfil its responsibility of providing liquidity as the lender of last resort, which is

bank took several measures thereafter, and in september 2016 it conducted a comprehensive assessment of the developments in japan's economic activity and prices as well as policy effects since the introduction of qqe, and decided to introduce qqe with yield curve control. the framework of qqe with yield curve control consists of two major components. the first is yield curve control in which the bank facilitates the formation of short - and long - term interest rates that are considered most appropriate for maintaining the momentum toward achieving the price stability target, taking account of developments in economic activity and prices as well as financial conditions. specifically, at present, according to the guideline for market operations, the bank sets the short - term policy interest rate at minus 0. 1 percent and purchases japanese government bonds ( jgbs ) so that 10 - year jgb yields will remain at around 0 percent. the second component is an inflation - overshooting commitment in which the bank continues with the monetary easing framework, aiming to achieve the price stability target, as long as it is necessary for maintaining that target in a stable manner. on this point, the bank makes clear that it will continue expanding the monetary base until the year - on - year rate of increase in the observed cpi ( all items less fresh food ) exceeds 2 percent and stays above the target in a stable manner. as shown in the comprehensive assessment, i consider that the main factor that hampers achieving the price stability target of 2 percent is as follows. in the course of the bank's attempt to raise inflation expectations, observed inflation rates declined due to a variety of exogenous factors such as a substantial fall in crude oil prices. under these circumstances, inflation expectations declined, as the adaptive mechanism has been playing a relatively large role in the formation of inflation expectations in japan. taking this into consideration, the bank decided to adopt a commitment that allows inflation to overshoot the price stability target so as to strengthen the forward - looking mechanism in the formation of inflation expectations, enhance the credibility of achieving the price stability target among the public, and raise inflation expectations in a more forceful manner. as for the future conduct of monetary policy, the bank will continue with qqe with yield curve control, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. in japan, there is some argument that the bank does not need to aim at 2 percent inflation. however, when adverse shocks hit the economy