and bonus payments rising, household income overall is increasing. nonetheless, the pace at which the positive influence of the corporate sector is feeding through to the household sector is, in fact, slow relative to the corporate sector's strength. this is evident especially in regular payments, which remain virtually unchanged year on year. this seems to be responsible for the often - heard statement that it is difficult to realize that japan is in the middle of the longest postwar economic expansion. the slowness of the increase in regular payments is attributable to both the stance of firms and the preference of employees : given the intensifying global competition, firms remain cautious about raising regular payments because this is likely to push up fixed costs ; while employees, having experienced a severe employment situation, continue to prefer stable employment to a wage increase. however, in a situation where the population of those 15 years old and over has been leveling off, further tightening of labor market conditions seems inevitable if demand for employees remains on the rise in line with the continuing economic expansion. given this situation, upward pressures on wages are likely to increase gradually. wages for part - time and temporary workers have, in fact, started rising. if an increase in wages becomes more apparent, the pace of increase in household income is expected to accelerate, thereby firming the sustainability of the upward trend in private consumption. some indicators related to private consumption have recently been somewhat sluggish, partly reflecting unfavorable weather conditions and consumers holding back from buying before the introduction of new products. although these developments continue to require close monitoring, our basic view is that private consumption will remain on the rise if increases in household income are in prospect. although, as i explained, developments in the corporate sector have been somewhat stronger than projected while those in the household sector have been somewhat weaker, we believe the basic mechanism of an economic expansion based on a virtuous circle of production, income, and spending is in operation. nevertheless, given the fact that there are some weak developments in indicators related to private consumption and consumer prices, we will carefully examine various types of incoming data and information. iv. developments in prices with these developments in the economy, the environment surrounding prices has been changing, albeit gradually. in the december tankan, for the first time in more than a decade, the number of firms that reported a shortage of production capacity outnumbered those reporting an excess, and it has become clear that firms are increasingly feeling a shortage of labor. these developments imply that

the rt hon sir edward george : macro - economic developments in the uk and its effects on the west midlands speech by the rt hon sir edward george, governor of the bank of england, at the west midlands conference “ 20 - 20 vision ”, birmingham, 20 september 2002. * * * your conference title is “ 20 - 20 vision ” - which i thought initially - and not unreasonably - meant it was to be all about hindsight. and i happily accepted the invitation to speak on that basis, because, as we all know, 20 - 20 hindsight is very easy - as a lot of commentators have demonstrated just recently in their criticisms of us policy - makers in the light of the economic and financial market bubble which built up in the late 1990's! it was only later that i realised you intended that we should look forward to the year 2020 - that the conference was to be a foresight saga - and at that point i began to get cold feet! central bankers are jolly lucky if they feel at all confident looking ahead 18 months, let alone 18 years - and sometimes recently - given the volatility in financial markets - its been difficult to predict what was likely to happen over the next 18 minutes! but here i am, and what i thought i would do this morning is to try to provide some sort of uk macro - economic context for your discussion of the challenges facing the west midlands by first looking backwards at some of the trends that we have seen over recent years and then trying to anticipate how those trends might evolve. people often tell me that retrospection is a sign of old age. but as i reflect on my 40 years at the bank of england i am increasingly conscious of the remarkable change that has occurred over that time - in fits and starts certainly, but in the same general direction - from a heavily administered economic and financial system to one which is much more market based. post - war controls on resource allocation had been largely dismantled before i started at the bank. but the financial system was still governed by all kinds of direct controls - exchange controls, credit ceilings on bank lending - coupled with directional guidance, the queuing of equity issuance and business restrictions - on the activities of building societies, for example ; and there was direct intervention in the wider economy through prices and incomes policies and public ownership of large parts of industry, and so on. but all of that has now gone. it's true that plenty of regulation remains reflecting public policy