a. supporting firms ’ activities 1. provision of credit when providing credit to firms, financial institutions need to continually find ways to satisfy the complex and diverse requirements of their customers in developing new business. in fact, japanese financial institutions have started to review their heavy dependence on real estate collateral, and expand the scope of loans that are without collateral and based on the evaluation of future cash flow. to promote this trend, financial institutions should improve their methods for evaluating cash flow in line with new business projects created by firms. they also need to make use of various forms of tangible and intangible assets such as accounts receivable and intellectual property in order to complement credit in place of real estate collateral. for large corporations with easy access to capital markets, the role of intermediation through securities business is vital. for example, some domestic and foreign securities firms recently underwrote convertible bonds ( cbs ) publicly issued by internationally active japanese firms, separated the bonds into equity options and straight bonds, and sold them to a wide range of investors including foreign investment funds. going forward, financial institutions need to perform higher levels of credit intermediation to satisfy both firms and investors. moreover, it is also important for financial institutions to establish deeper relationships with firms. the relationships between lenders and borrowers are so complex that much research has been conducted in areas such as the “ principal - agent problem ” and “ information asymmetry ”. i think the traditional relationship between banks and firms in japan may have been behind the strong tendency toward mutual restraint and interdependence as exemplified in cross - shareholdings. moreover, the traditional business practices of pursuing profitability not of individual transactions but rather of business as a whole may have weakened business discipline between lenders and borrowers. for financial institutions, maintaining close relationships with firms is critical to fully utilizing their information production capability. if such a relationship creates too much mutual restraint and weakens mutual discipline, however, it may result in inefficiency and work unfavorably in a competitive environment as both financial institutions and firms face continual and frequent change. this relationship cannot be regarded as desirable. the long - term close relationship between firms and banks in japan has attracted attention globally as a model for corporate finance. but it is now necessary to modify this relationship into one that is more suitable to a world in which lenders and borrowers make proactive proposals and check each other. under such new relationships, both firms and banks are expected to take advantage of

for the time being, reflecting the slowdown in overseas economies, and business fixed investment also is likely to decelerate somewhat, mainly for manufacturing. thereafter, exports are projected to return to their moderate increasing trend, with the growth rates of overseas economies rising gradually. the rate of increase in business fixed investment is expected to rise somewhat due to increases, for example, in labor - saving investment. private consumption is likely to be pushed down for some time due to the effects of the scheduled consumption tax hike, but is expected to continue increasing as the employment and income situation continues to improve. public investment also is likely to increase, reflecting olympic games - related demand and expansion in expenditure such as for national resilience. in fiscal 2020, the pace of increase in exports is expected to accelerate, with the growth rates of overseas economies rising, and government spending accompanying the hosting of the olympic games is expected to underpin the economy. business fixed investment is likely to maintain a moderate uptrend. private consumption and housing investment are expected to head gradually toward a recovery from a decline after the scheduled consumption tax hike. in fiscal 2021, private consumption and housing investment are projected to increase because the effects of the reactionary decline to the scheduled consumption tax hike are likely to dissipate, although olympic games - related expenditure - - which had been increasing - - will have been completed. exports and business fixed investment are likely to maintain their moderate uptrend. in terms of the medians of the policy board members'forecasts in the july outlook report, the real gdp growth rate is 0. 7 percent for fiscal 2019, 0. 9 percent for fiscal 2020, and 1. 1 percent for fiscal 2021. 3. uncertainties regarding the baseline scenario for economic activity there are various uncertainties regarding the baseline scenario of the outlook for japan's economic activity, and i would like to explain two points to which i currently pay particular attention. first is the risk that the timing of the bottoming out of external demand will delay. since the latter half of 2018, i have assessed that risks are tilted to the downside, particularly those regarding developments in overseas economies. recently, due to political factors such as the strengthening of protectionist moves, downside risks seem to be increasing further. i am concerned that this could affect the timing of the bottoming out of external demand through various channels including disruptions in financial markets and a reduction in firms'incentive to invest caused by developments in trade. second is the effects