gses. our special lending programs have also been set up to minimize our credit risk. the largest program, the commercial paper funding facility, accepts only the most highly rated paper. it also charges borrowers a premium, which is set aside against possible losses. and the talf, the facility that will lend against securities backed by consumer and small business loans, is a joint federal reserve - treasury program, as i mentioned, and capital provided by the treasury will help insulate the federal reserve from credit losses. the transactions we undertook to prevent the systemically destabilizing failures of bear stearns and aig, which, as i noted, make up about 5 percent of our balance sheet, carry more risk than our traditional activities. but we intend, over time, to sell the assets acquired in those transactions in a way that maximizes the return to taxpayers, and we expect to recover the credit we have extended. moreover, in assessing the financial risks of those transactions, once again one must also consider the very grave risks our nation would have incurred had public policy makers not acted in those instances. finally, i should remind you that all the federal reserve's assets pay interest, and the expansion of our balance sheet thereby implies increased interest income, income that will accrue to the benefit of the federal budget. from the point of view of the federal government, the federal reserve's activities do not imply greater expenditure or indebtedness. to the contrary, the federal reserve's interest earnings have always been, and will continue to be, a significant source of income for the treasury. on the second question, transparency, i firmly believe that central banks should provide as much information as possible, both for reasons of democratic accountability and because many of our policies are likely to be more effective if they are well understood by the markets and the public. during my time at the federal reserve, the fomc has taken important steps to increase the transparency of monetary policy, such as moving up the publication of the minutes of policy meetings and adopting the practice of providing projections of the evolution of the economy at longer horizons and four times per year rather than twice. later today, with the release of the minutes of the most recent fomc meeting, we will be making an additional significant enhancement in federal reserve communications : to supplement the current economic projections by governors and reserve bank presidents for the next three years, we will also publish their projections of the longer - term values ( at a horizon of

is expected to reach around 2 percent toward the latter half of the projection period of fiscal 2013 – 15. 4 personally, i am aware of the possibility that it may take some time to achieve the 2 percent target, since the duration depends crucially on “ the pace of improvement in the employment and income situation in japan. ” moreover, it is possible that it may take even longer to achieve a situation where the 2 percent target is maintained in a stable manner, considering the duration required to judge whether the condition described as “ in a stable manner ” is met. during this period, support from monetary policy is likely to be necessary. bear in mind here that the bank adopted the 2 percent target in january 2013, assuming that such an inflation rate should be sustainable. 5 hence, the bank ’ s decisions on the necessity and measures of future monetary easing should be judged in line with the objective to pursue a society with 2 percent price increase in a stable manner. why is the bank ’ s forward guidance so different from that of the federal reserve? the form of forward guidance adopted by the bank differs from that of the federal reserve on several fronts ( chart 4 ). first, the federal reserve applies forward guidance to its primary short - term policy interest rate ( the overnight federal funds rate ) and provides guidance to the the consumption tax rate in japan is scheduled to increase from 5 percent to 8 percent in april 2014 and further to 10 percent in october 2015. the hikes are expected to raise cpi - based inflation by about 2 percentage points for fiscal 2014 and by 0. 7 percentage point for fiscal 2015, respectively. when assessing the inflation rate, the bank disregards the effects of these increases as they are temporary. the joint statement of the government and the bank of japan on overcoming deflation and achieving sustainable economic growth, released in january 2013, stated, “ the bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of japan ’ s economy make progress. ” based on this recognition, the bank set the 2 percent target. bis central bankers ’ speeches markets and the public about how long it expects to keep the current exceptionally low level. in other words, the federal reserve attempts to exert downward pressure on longer - term interest rates by influencing expectations of the markets and the public regarding the continuation of the current low level of short - term interest rates over an extended period of time. asset purchases are regarded as