haruhiko kuroda : japan ’ s economy and monetary policy speech by mr haruhiko kuroda, governor of the bank of japan, at a meeting with business leaders, nagoya, 25 november 2014. * * * introduction it is my great pleasure to have the opportunity today to exchange views with administrative, financial, and business leaders in the chubu region. i would like to take this opportunity to express my sincerest gratitude for your cooperation with the bank of japan ’ s nagoya branch. in april last year, the bank introduced the quantitative and qualitative monetary easing ( qqe ) to achieve the price stability target of 2 percent at the earliest possible time, with a time horizon of about 2 years. the introduction of the qqe aimed at changing the deflationary mindset, which has taken root amid prolonged deflation, and at converting the economy from being in a deflationary shrinking equilibrium to being in an expanding equilibrium through creating a situation where people base their behavior on the assumption that prices rise moderately. during the year and a half since then, conversion of the deflationary mindset has been progressing steadily. the economy has continued to see moderate recovery, and the year - on - year rate of change in the consumer price index ( cpi ) has moved from negative territory to around 1¼ percent. nevertheless, the rate of increase in the cpi has slowed somewhat of late due, for example, to somewhat weak developments in demand following the consumption tax hike and a substantial decline in crude oil prices, and there has been a risk that conversion of the deflationary mindset might be delayed. the bank ’ s expansion of the qqe at the end of last month aims to preempt the manifestation of this risk and to maintain the improving momentum of expectation formation. today, i would first like to review japan ’ s economic and price developments, and then touch on the thrust of the expansion of the qqe. i. developments in economic activity and prices to begin with, let me talk about developments in japan ’ s economic activity and prices. real economy some weakness in japan ’ s economy has remained, particularly on the production side, against the background of inventory adjustments brought by the effects of a decline in demand following the front - loaded increase prior to the consumption tax hike. the real gdp growth rate declined substantially in the april - june quarter and was minus 1. 6 percent in the july - september quarter on an annualized quarter - on -

. persons sme to sme sme to large enterprise large enterprise to sme large enterprise to large enterprise cy 00 notes : 1. smes are enterprises with 5 - 299 employees. large enterprises are those with 300 employees or more. 2. figures represent data for the first half of each year ( january - june ). sources : ministry of health, labour and welfare ; small and medium enterprise agency. chart 14 international comparison of entry and exit rates entry rate % exit rate japan united kingdom france united states germany cy 08 09 10 11 12 13 14 15 16 17 18 19 % japan united kingdom france united states germany cy 08 09 10 11 12 13 14 15 16 17 18 19 note : japan's figures are on a fiscal - year basis. sources : ministry of health, labour and welfare ; small and medium enterprise agency ; u. s. census bureau ; eurostat. chart 15 venture capital investment bil. usd bil. usd japan germany france united kingdom united states ( right scale ) cy 09 source : oecd. chart 16 ratio of firms'vocational training costs to gdp 2. 5 % 2. 0 1. 5 1. 0 0. 5 0. 0 united states france germany italy 1995 - 1999 2000 - 2004 2005 - 2009 united kingdom japan 2010 - 2014 note : figures are estimated by professor miyagawa tsutomu ( gakushuin university ) based on the cabinet office's " system of national accounts, " " jip database, " and intan - invest database. source : ministry of health, labour and welfare. chart 17 firms'investment in off - the - job training and self - development support off - the - job training self - development support thous. yen thous. yen fy 08 note : figures are the average amount of spending per worker. source : ministry of health, labour and welfare. fy 08 chart 18 average income per household 8, 000 thous. yen % 6, 781 7, 000 6, 593 6, 102 6, 000 6, 169 5, 000 ratio of elderly households ( right scale ) all elderly households all excluding elderly households 4, 000 3, 195 5, 523 3, 126 3, 000 2, 000 cy 00 source : ministry of health, labour and welfare.