future, and such uncertainty is another crucial point that should be taken into consideration in the conduct of monetary policy. specifically, no one knows whether the flattened phillips curve will be a lasting phenomenon. in our outlook report published in april, we pointed out that the shape of the phillips curve may change along with changes in inflation expectations or labor cost restraint by firms. moreover, there is more than one hypothesis competing to explain the flattening of the phillips curve : for example, some point to decrease in firms'control over prices as a result of the stiff competition following deregulation and globalization, while others refer to the decreasing frequency of price revisions by firms in response to disinflation. inevitably, the outlook for the future differs depending on the hypothesis favored. actual economic developments always entail uncertainty, and not only for the reasons i just stated. just as with other economic challenges, a final resolution to the problems posed by inflation dynamics may be too much to ask for. yet in spite of this, central bankers must keep up with the cutting - edge ideas and insights of their time and reflect them in their policy management. as one such central banker, i am very much looking forward to seeing our understanding of inflation dynamics deepened thanks to the research efforts stimulated by conferences such as this. thank you very much for your attention.

toshihiko fukui : inflation dynamics and monetary policy summary of a speech by mr toshihiko fukui, governor of the bank of japan, at the international conference on inflation dynamics, hosted by hitotsubashi university, tokyo, 28 june 2007. * * * it is my great pleasure to be invited to speak before such distinguished economists from both japan and overseas. the theme of this conference, " inflation dynamics, " is, without any question, one that cannot be ignored by any central banker pursuing the most desirable monetary policy. presumably it is the interest in a central banker's perspective on this key topic that explains why i have been given the privilege of speaking to you today. accordingly, i would like to take this opportunity to give my thoughts on the subject. the issue of inflation dynamics has been studied for a long time, yet remains as relevant today as ever. the year i joined the bank of japan, 1958, was the year when the seminal paper by professor alban w. phillips was published. half a century on, the basic idea behind the phillips curve has been considerably extended, and many related theories have evolved in connection with the role of expectations, the mechanisms that bring about price rigidity, and so forth. for monetary policy to achieve its objective of price stability, it is extremely important to accurately understand the dynamics of inflation. these dynamics, however, may change along with changes in the economic structure, and it is often difficult to detect such changes in a timely manner. this often becomes a source of anxiety to central bankers conducting monetary policy in the real world. in recent years, especially, the biggest challenge facing central bankers may be the conduct of monetary policy in the face of the flattening of the phillips curve and increase in uncertainty with regard to inflation dynamics. with a flatter phillips curve and given a situation where the inflation rate is within the desirable range, small economic fluctuations will not cause the inflation rate to shift outside the range. on the other hand, a flatter phillips curve means that, once inflation shifts outside the range, bringing it back is that much harder, since the output gap or the change in the output gap necessary to raise or lower the inflation rate becomes correspondingly larger. for example, in the united states, governor mishkin of the federal reserve board, in his speech delivered in april, stated that " returning inflation too quickly to levels consistent with price stability might unnecessarily exacerbate the economic weakness