##coin transactions, encryption keys have sometimes been entrusted to a third party in a centralized manner, but there have been some incidents such as the failure of mt. gox in 2014. in this case, people tried to avoid the cost of managing keys accompanying decentralized - type information processing by entrusting their keys to a third party, mt. gox. but their trust was destroyed by the misconduct of the third party. in this regard, the problem of the mt. gox case did not stem from dlt itself but was similar to classic cases of misconduct in the financial industry. as this case illustrates, decentralization - oriented technologies will not eliminate centralized frameworks due to the limited information - processing capacity of financial service users. furthermore, this incident clearly showed that maintaining “ trust ” is critically important in any financial services, regardless of the types of applied technologies. i believe that it is entirely possible and desirable to realize the co - existence of “ trusted centralized systems ” and “ decentralized systems, ” used as and when necessary. we need to make a great effort to design the optimum framework for economic society through utilizing the available technologies. these frameworks should take into consideration the various incentives of economic entities to ensure people ’ s “ trust, ” which is indispensable to financial activities. information technology and central banking the central bank is the only entity that can provide “ central bank money ” without constraints. central bank money has “ finality ” in the sense that people no longer have to worry about “ payment unwinding ” or “ the issuer ’ s credit risk. ” formerly, the central bank provided central bank money solely through paper - based and printing - related technologies such as banknotes and paper - based ledgers. with the development of the economy, the central bank has adopted newer technologies, improved its own infrastructure and continuously provided advanced infrastructure such as electronic - based wholesale rtgs systems. if the central bank had rejected digital technologies and only provided banknotes as payment instruments with finality, 5 / 7 bis central bankers'speeches then economic development would have been substantially constrained. as this fact illustrates, the central bank must appropriately adopt available technologies so as to provide the optimal core infrastructure for economic society. that means the central bank itself must keep abreast of technological innovation. banknotes are payment instruments with finality and can be used at any time, by any one, and in this regard some have recently argued that the central bank should issue

in these economies. what creates such differences? my answer is that the forecasts of prices based on past inflation have performed well in japan, as the inflation rate was persistently low for a long time during the deflationary period since the second half of the 1990s. during this period, if the actual inflation rate in the previous year was 0 percent, for example, it was reasonable to project that the inflation rate would be 0 percent again in the following year, rather than rise to 2 percent. however, professor milton friedman - - a distinguished scholar of economics - - made the following argument, stating that how inflation expectations are formed among the public is subject to change. if wages are unchanged in a situation of continued inflation, employees'real income will be lost to the extent of inflation. they would not tolerate such a situation forever ; rather, they eventually will start to forecast future inflation in a forward - looking manner and demand wage increases based on the forecast. this is an example for wages, but the same mechanism will be in place for retail prices of products and services ; in an inflationary phase, firms will start to anticipate future inflation and raise their retail prices based on their forecast. as for the outlook, the year - on - year rate of increase in consumer prices is expected to accelerate, as upward pressure on wages heightens amid a further tightening of labor market conditions, and as a positive contribution of energy prices to inflation increases. friedman's argument suggests that, during this inflationary phase, inflation expectations in japan will become less affected by past inflation, with a gradually increasing number of people formulating their inflation expectations in a forward - looking manner, as is the case in the united states. furthermore, as i will talk about more later, the bank will continue to pursue powerful monetary easing with the aim of achieving its price stability target of 2 percent. against this backdrop, although uncertainty about future developments in inflation expectations warrant attention, japan's inflation rate is likely to gradually increase toward the price stability target of 2 percent. ii. thinking behind the conduct of monetary policy next, i would like to talk about the thinking behind the bank's conduct of monetary policy. since last september, the bank has been conducting monetary policy under the framework of " quantitative and qualitative monetary easing ( qqe ) with yield curve control. " this framework consists of two components ( chart 10 ). the first is an inflation - overshooting commitment. this is the bank's