fixed investment will probably remain on an upward trend amid an accommodative financial environment. b. the euro area economy : facing intraregional disparities and fiscal problems turning to europe, i will focus on the economic activity in the euro area. economic activity in the euro area as a whole has been recovering moderately, with intraregional disparities increasing. the real gdp growth rate in the april - june quarter marked a large increase of 3. 9 percent on an annualized quarter - on - quarter basis, up from the previous quarter ’ s when growth in imports exceeds that in exports, net exports ( exports minus imports ) decrease, pushing down gdp growth. the sharp increase in imports in the april - june quarter seems to have been only temporary. 1. 3 percent. the increase mainly reflects a steady growth in exports due in part to the depreciation of the euro. the economy, however, has been facing two challenges that have arisen from fiscal issues, and have intraregional disparities. the first issue concerns fiscal consolidation. looking at the april - june quarter ’ s real gdp indicators by country, germany marked the highest growth since the country ’ s reunification in 1990 and was supported by strong exports. meanwhile greece, the first to adopt substantial fiscal tightening measures to combat its severe fiscal problems, saw declines for the seventh consecutive quarter. although the extent of the area ’ s problems varies, fiscal consolidation must be carried out not only by the most seriously troubled countries such as greece, but by all member states of the european union. the second issue concerns stability in financial markets. since the start of 2010, concern about fiscal problems in some european countries has caused the prices of government bonds in these countries to fall, leading to heightened anxiety about the soundness of european financial institutions that hold large amounts of the bonds. after the july release of the stress test exercise results for these institutions, european financial markets restored stability for a while, but a resurgence of fiscal problems in ireland has revived market instability. it is anticipated that the two issues just mentioned will add downward pressure on the euro area economy, thereby moderating the pace of future economic recovery. the root of the two issues may lie in the use of a single currency, the euro, the structural factor unique to the area. its introduction, while stimulating an increase in the euro area ’ s intraregional trade, expanded the fiscal and current account deficits of some european countries because of the disparity in productivity

lie at the root of the fiscal problems, and thus it is unlikely that there will be a quick resolution to the volatile situation in financial markets caused by the situation in europe. 4. risks related to japan ’ s corporate sector the last risk posed by overseas economies relates to the corporate sector in japan. if expectations are rising that demand in japan will be lackluster, while expectations for sustainable growth among emerging economies increase, there is a risk that investment in and lending to emerging economies will expand and japanese firms ’ spending on business fixed investment and employment will be placed under undue restraint. according to the survey on planned capital spending, released by the development bank of japan, the ratio of the japanese manufacturing sector ’ s overseas capital investment ( capital investment overseas divided by capital investment in japan multiplied by 100 ) for fiscal 2010 was a record high of 57. 2 percent. 5 furthermore, according to the annual survey of corporate behavior, conducted by the cabinet office, the ratio of overseas production has been on an upward trend. recently, an argument arose linking the yen ’ s appreciation to the hollowing out of domestic industry. however, i believe it necessary to view this issue from a medium - to long - term perspective, linking it to the issue of productivity and the potential growth rate. i will expand on this topic later in more detail. iii. conduct of monetary policy a. policy responses by the bank of japan next, i will outline some of the bank ’ s monetary policy measures, implemented since the lehman shock in 2008. policy measures become operative and effective through synergy, however, for the sake of explanation, i will categorize them into three types according to their objectives. 1. measures responding to cyclical economic changes : pursue powerful monetary easing measures taken in response to cyclical economic changes were designed to overcome deflation and return to a path of sustainable growth for japan ’ s economy, which had deteriorated significantly following the lehman shock. the bank undertook interest rate policy, lowering its target for the uncollateralized overnight call rate – the policy rate – by 0. 2 percentage point both in october and december 2008, to 0. 1 percent, or virtually zero percent. since then, the policy rate has remained at that level. the bank has also been encouraging longer - term interest rates to decline. in december 2009, it introduced a fixed - rate funds - supplying operation against pooled collateral ( hereafter the fixed - rate the survey was conducted in june this year with valid