koji ishida : recent economic and financial developments in japan summary of a speech by mr koji ishida, member of the policy board of the bank of japan, at a meeting with business leaders, kagoshima, 21 june 2012. * * * i. economic activity and prices in japan a. recent developments 1. japan ’ s economy first, i will talk about recent developments in economic activity and prices in japan. economic conditions in japan worsened sharply in the wake of the severe global contraction that followed the failure of lehman brothers in 2008. thereafter, the economy showed signs of recovery as a result of various policy measures taken as well as efforts made nationwide, but it plunged again due to the great east japan earthquake, which occurred on march 11, 2011. this was followed by additional shocks such as the european debt problem and the flooding in thailand, making the year 2011 an extremely severe one for japan ’ s economy. since the beginning of 2012, japan ’ s economic activity has started picking up moderately as domestic demand remains firm, supported mainly by reconstruction - related demand after the earthquake. public investment has been increasing with the progress in the implementation of government budgets earmarked for reconstruction related to the disaster. business fixed investment has been on a moderate increasing trend with corporate profits improving. against the background of improvement in consumer sentiment, private consumption has continued to increase moderately due to the effects of measures to stimulate demand for automobiles. a high degree of uncertainty remains regarding exports, but they have shown signs of a pick - up. reflecting these developments in demand, production has started picking up moderately. price developments in terms of the consumer price index ( cpi ; all items less fresh food ) indicate that, after reaching a historical trough of minus 2. 4 percent in the middle of 2009, the year - on - year rate of decline has continued to slow. in recent months, the rate of change has been at around 0 percent. 2. overseas economies next, i will talk about recent developments in overseas economies. with regard to the u. s. economy, business fixed investment is maintaining its uptrend, supported by firm corporate profits, and private consumption is also increasing moderately. the employment situation continues to recover modestly as a whole so far, although it appears that the effects of the boost from a record - breaking warm winter are starting to dissipate. on the other hand, the economic activity in the euro area has been sluggish despite signs of a pick - up in exports

to the changing social structure and create demand by replacing old products and services with new ones. the structure of consumption, or spending patterns, has also changed largely reflecting the population aging with fewer children. the outcome of competition among firms now depends on how they adapt to such changes. new job opportunities will be created in the process of such corporate endeavors. it is also essential to seek overseas demand, since the population in japan is declining. rapidly expanding asian markets are located close to japan. in view of an expected rise in income levels in the area, these markets are likely to become extremely important for high - quality goods produced in japan that offer superior features in terms of safety and reliability, although production of “ volume - zone, ” widely used goods, may have to be done overseas. moreover, looking further ahead, it is very likely that japan will be able to offer products and services developed for its aging society to other asian nations, since their populations too are bound to mature. with this favorable outlook in mind, stepping up investment for growth would lead to a larger flow of funds, an expanded job market, and ultimately sound economic growth in japan as well as asia. the data for april 2012 were taken from the labour force survey released by the ministry of internal affairs and communications. the number of “ hidden unemployed ” represents those “ wishing to work ” in the category of “ not in the labour force. ” a breakdown of figures for those “ not in the labour force ” is not published on a monthly basis, and therefore, the simple average of three months for the period between january through march 2012 ( 4. 38 million ) was used. bis central bankers ’ speeches d. regional areas viewed from a different perspective, the decline of the population is likely to have a larger effect on regional areas than on urban ones. if job opportunities in these areas are insufficient, youthful job seekers will leave, causing a population drain and leading to a further shrinkage of regional economies. to respond to this situation, it is important to make full use of the resources unique to each region, in addition to human resources of the elderly and women : for example, to draw on the labor of the elderly in the areas of nursing care, where demand is growing, or of childcare ; and to revitalize the primary industry. business opportunities may also lie in agricultural and food industries in rural japan. it is possible that the supply - demand conditions for food will tighten worldwide reflecting the rapid growth of emerging economies, and as