also important to address structural issues such as ( 1 ) population decline, which can hinder expansion of domestic demand in the medium to long term ; and ( 2 ) massive government debt. efforts toward achieving fiscal consolidation are extremely important not only in terms of increasing firms ’ medium - to long - term expectations for the growth rate of domestic demand, but also in terms of improving the environment in which the effects of qqe will be maximized and of enabling smooth normalization of qqe in the future. basically, such improvements on the supply side of the economy are to be made through efforts by the government and firms. on the other hand, monetary policy – for which the intrinsic function is to work on the demand side of the economy – can provide indirect support for such efforts by providing a benign financial environment. in this regard, in a situation where supply - side constraints are likely to become increasingly binding as a trend, i consider it also necessary to carefully monitor, from the viewpoint of maintaining the stability of the economy, whether there will be concern over overheating. in light of the bank ’ s principle that monetary policy shall be “ aimed at achieving price stability, thereby contributing to the sound development of the national economy ”, i think that achieving prolonged economic recovery, albeit moderate, while at the same time increasing the labor productivity bis central bankers ’ speeches growth rate and the potential growth rate, will lead to an increase in real income and improvement in the quality of people ’ s lives. meanwhile, it should be noted that, in the course of proceeding with structural reforms, the growth potential of the economy will increase and the general price level that is stable and consistent with the growth potential will rise in the medium term. in the short term, however, prices might face downward pressure, for example, when those in certain industries decline due to deregulation. bearing this in mind, i think that the conduct of monetary policy with a price stability target has to be very flexible. d. price stability target and two perspectives under qqe, the bank purchases assets on an unprecedented scale. therefore, it is necessary to be particularly vigilant against various potential risks ; for example, the possibility of such purchases leading to a buildup of financial imbalances. in this regard, the bank conducts monetary policy, based on the framework of assessing economic activity and prices from two perspectives, in the context of the price stability target. the first perspective is examining, as regards economic activity and prices over

the underlying trend in inflation – through, for example, efforts by the government and firms – and that a considerable period of time will be required for this to take place. therefore, rather than aiming to achieve the 2 percent price stability target through monetary policy alone in the short term, i believe that resetting the time frame for achieving the target to the medium to long term and conducting monetary policy in a flexible manner – coupled with an improvement in communication with financial markets – will lead to maintaining economic and financial market stability. this will result in reaching the bank ’ s ultimate goal of contributing to the sound development of the national economy. bis central bankers ’ speeches