in labor participation by women and seniors is favorable. 11 compared to a while ago, seniors have become healthier of late. for example, they now are deemed to be physically younger by about 5 years in terms of their average walking speed, and by about 10 years based on their average number of teeth ( chart 18 ). as for capital, its contribution to economic growth had been low in japan during the 1990s, but eventually business fixed investment has started to expand in recent years. knowledge such as people's skills and expertise, science and technology, and education recently has become more and more important for economic growth. this is indicated by the recent increase in investments intended for software as well as research and development. this " knowledge economy " is closely connected to globalization. we tend to think of globalization as the exchange of goods or services, and it is true that economic problems stemming from a declining and aging population can be dealt with, for example, by increasing there is an argument that the unemployment rate has been declining because the working - age population has shrunk due to a declining and aging population. however, in fact, a decline in the unemployment rate has been observed in a situation where labor force has increased since 2013 despite a shrinking in the working - age population. for details, see wakatabe, m., " japan's economy and monetary policy, " speech at a meeting with business leaders in aomori, june 27, 2019, http : / / www. boj. or. jp / en / announcements / press / koen _ 2019 / ko190627a. htm /. imports of labor - intensive goods and tourism. however, we should not forget the fact that globalization also entails the exchange of knowledge. a declining and aging population could affect economic activity not only through simple changes in labor input but also through various other channels. 12 it also could have an impact on other factors such as social security. 13 some argue that a declining population leads to a decrease in the number of those engaged in knowledge production, resulting in an end to economic growth. 14 further research about the effects of a declining population on economic growth is still necessary. d. role of monetary policy as stipulated in the bank of japan act, the aim of the bank's monetary policy is " achieving price stability, thereby contributing to the sound development of the national economy. " of course, economic growth is supported by the growth policies that have an effect on the supply side of

a high level ( chart 8 ). taking these developments into account, it is necessary to closely examine whether the scenario will be realized in which firms'activities will become more active through a decline in uncertainties, and in turn trade activity and business fixed investment also will pick up. the second risk factor is developments in domestic demand. the effects of the consumption tax hike on household spending can be divided into two : ( 1 ) an increase in demand prior to the tax hike and a reactionary decline and ( 2 ) a decline in households'real income due to the tax hike. the former seems to have been constrained this time compared to those of the previous tax hike, partly due to the government's various policy measures ( chart 9 ). on the other hand, the effects of the latter could materialize gradually through, for example, changes in households'spending attitudes - - that is, the propensity to consume. this time, compared with the previous tax hike, the increase in the net burden on households due to the tax hike has been constrained owing to various support measures and growth in employee income has been maintained, and both factors are likely to underpin real income. looking at indicators of consumer sentiment that can capture households'spending attitudes relatively early, these continued to show some weakness before the tax hike, whereas there seems to have been a pick - up to some extent after the tax hike, mainly led by the category of " overall livelihood " in the consumer confidence index ( chart 10 ). however, it is too early to make an assessment on households'spending attitudes at this point, and we would like to carefully examine additional data when they become available. ii. price developments next, i will explain price developments ( chart 11 ). a sustained decline in prices continued in japan for many years. in order to overcome this situation, the bank introduced quantitative and qualitative monetary easing ( qqe ) in 2013 and has pursued a large - scale monetary easing since then. subsequently, the economy has improved significantly and the year - on - year rate of change in the consumer price index ( cpi ) has taken hold in positive territory. thus, japan's economy already is no longer in deflation in the sense of a sustained decline in prices. the year - on - year rate of change in the cpi currently is at around 0. 5 percent, and this level is still lower than the price stability target of 2 percent set by the bank. although there are some factors that