takehiro sato : the bank of japan ’ s efforts toward overcoming deflation remarks by mr takehiro sato, member of the policy board of the bank of japan, at the 7th japan securities summit, london, 11 february 2015. * * * accompanying slides can be found at the end of the speech. i am truly honored to have this opportunity to be a panel member at the 7th japan securities summit. japan ’ s economy has continued to recover moderately as a trend with a virtuous cycle from income to spending operating steadily in both the household and corporate sectors. as for the outlook, it is expected to continue its moderate recovery trend. in the bank of japan ’ s january 2015 interim assessment of the outlook for economic activity and prices ( hereafter the outlook report ), the median of the policy board members ’ forecasts for the growth rate for fiscal 2015 and 2016 were revised upward from the forecasts presented in the october 2014 outlook report, partly due to the drop in crude oil prices and the effects of the economic measures by the government. on the price front, the inflation rates in major countries, including japan, have been declining as a trend mainly due to the recent drop in crude oil prices. under those circumstances, central banks in major countries have a common concern that major economies are trapped in a feedback - loop – the decline in the inflation rates would lead to a fall in people ’ s mediumto long - term inflation expectations, and it would result in a further decline in the actual inflation rates. that is why the bank decided to expand the qqe last october. as i cast a dissenting vote on that decision, i may not be an appropriate person to explain this policy. however, i share the bank ’ s firm resolution to overcome deflation. in this session, i will share with you my views on the effects of the qqe, the bank ’ s price stability target, and the importance of the government ’ s effort toward fiscal consolidation to ensure the ultimate success of the qqe. first of all, the effects of the qqe have been increasing in a cumulative manner with the progress in the asset purchases by the bank. the bank purchases the japanese government bonds ( jgbs ) so that their amount outstanding increases at an annual pace of about 80 trillion yen. this amount, “ about 80 trillion yen ”, substantially exceeds the planned amount of new financial resource bonds by the government, which means that final investors decrease their outstanding holdings of jgb

b. future monetary policy the bank has been enhancing easy monetary conditions through various measures, including those i have just outlined, and by also making clear its commitment to maintaining an extremely accommodative financial environment. i am certain that the synergy resulting from these measures has supported economic activity and helped clear the way to overcoming deflation by improving the aggregate supply and demand balance. as already noted, projections are always subject to uncertainties. thus, it is necessary to examine closely the forthcoming economic data and information, so that necessary policy measures can be taken swiftly and decisively should downside risks threaten before deflation has been overcome, raising the possibility that the economic outlook might deteriorate significantly. today, i have outlined some of the measures the bank has implemented over the past two years since the collapse of lehman brothers. in addition, it implemented various pioneering measures from the latter half of the 1990s to the early 2000s that are similar to those adopted by central banks in other major countries in response to recent financial crises. the selection of appropriate policy measures and enhancing of policies require that their possible effects on the economic outlook be taken into consideration, based on domestic and overseas expertise. the selection of suitable measures requires that the costs which may arise from the implementation of measures, their efficacy, potential risks, and means to prevent such risks from materializing should be considered ahead of time. it is necessary, in addition, to keep up - to - date information regarding the effectiveness, probable costs, and side effects of policy measures, since they reflect changes in the economic and financial situation, as well as fiscal and institutional structures.