monetary base target. 4 second, the views of the bank and other central banks differ in regard to long - term inflation expectations. forward guidance issued by the federal reserve assumes that longer - term inflation expectations have been anchored at around 2 percent. the bank of england ( boe ) includes a similar view in one of its conditional forward guidance “ knockouts. ” therefore, one of the main tasks for these central banks is to continue with monetary easing measures to seek economic recovery, while ensuring that the anchored inflation expectations are maintained. in contrast, the bank has not yet successfully anchored long - term inflation expectations at around 2 percent. thus, the bank must focus on first transforming the deflation - oriented mindset and then increasing inflation expectations to a higher level than the current one. third, federal reserve and boe forward guidance includes employment - related thresholds. the federal reserve has a dual mandate of promoting price stability and maximum employment, so the reason for this is clear. the boe sees price stability as its primary mandate ; however, the inclusion of employment - related conditions may have reflected the need to clarify its views on the trade - off between inflation and unemployment. in contrast, there is a relatively small need for the unemployment threshold to be used in the bank ’ s guidance. the unemployment rate for december 2013 was 3. 7 percent, close to the lowest point in recent years of 3. 6 percent, which was attained in july 2007. some labor issues exist, such as the differential treatment of regular and non - regular workers and firms ’ demand for increased flexibility over labor market regulations. however, these are structural issues that are beyond the scope of monetary policy. 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 bank has charged 0. 1 percent on excess reserves since october 2008. thus, this interest rate functions largely as a floor for the interbank market interest rates. bis central bankers ’ speeches iii. performance of qqe in light of communication on monetary policy next, i would like to focus on the current performance of qqe in light of the public ’ s perceptions of monetary policy and price developments. a. households ’ understanding of the qqe framework and inflation expectations households are important economic entities that undertake consumption and residential investment. thus, understanding their current and future behavior is essential to examining the transmission mechanism of monetary easing. moreover

for the next quarter. in addition, the difference between this di and the correspondent di for input prices is often used as a proxy for profit margins ( chart 10 ). it is known that the di for output prices tends to be downward - biased and the di for input prices tends to be upward - biased, so the interpretation of these indicators needs to take these tendencies into account. 11 the drawback of this approach is that the data are only available for the next quarter, so only very short - term inflation expectations can be measured. the chart shows that there are some signs of an increase in firms ’ inflation expectations based on the di for output prices, but the indicator has leveled off very recently. fortunately, the bank will begin publishing a survey of firms ’ longer - term inflation expectations ( looking one, three, and five years ahead ) beginning with the march 2014 tankan survey. it is expected that this will promote a better understanding of firms ’ inflation expectations and their price - setting behavior. regarding factors contributing to firms ’ inflation expectations, the annual report on the japanese economy and public finance 2013, compiled by the cabinet office, conducted an interesting survey in february 2013. it showed that firms tend to raise their outlook for sales the respondents covered 367 listed firms. approximately 56 percent were nonmanufacturing firms, 41 percent were manufacturing firms, and the remainder were financial institutions. the survey population encompasses about 210, 000 firms ( excluding financial institutions ) that have at least 20 million yen in capital. more than 11, 000 firms are sampled in each survey. see, for example, koichiro kamada and kentaro yoshimura, “ kigyo no kakaku mitoshi no kochokusei : tankan di wo mochiita bunseki ( rigidity in firms ’ price expectations : an analysis based on the bank of japan ’ s tankan [ short - term economic survey of enterprises in japan ] di ), ” bank of japan working paper series, no. 10 - j - 3, 2010 ( available only in japanese ). bis central bankers ’ speeches prices of goods and services over the next year when they project that market prices over the same period will increase. 12 this response was provided by approximately 70 percent of manufacturing respondents and more than 50 percent of nonmanufacturing respondents. in other words, if an increase in demand for goods and services leads to a rise in market prices, this may induce firms to raise their sales prices. this situation is