situation continuing during the projection period in the january 2017 outlook report. however, it can be said that my view continues to be fairly cautious compared with the medians of the policy board members ’ forecasts. let me explain the reasons behind my view. first, there is not a driving force — including in terms of the effects of monetary easing — that will bring about economic growth that is sustainable at a level clearly higher than the potential growth rate, as the phase of economic recovery has been prolonged and the output gap has already almost closed. the economy is therefore likely to continue growing generally at about the same level as the potential growth rate, which is estimated to be around 0. 5 percent. second, as a result of these factors, the output gap is expected to remain more or less at a neutral level. therefore, in my view, price conditions will remain consistent with the economy ’ s growth potential, as it is difficult to expect that there will be 1 / 8 bis central bankers'speeches a marked rise in the underlying trend in inflation, which excludes factors causing temporary fluctuations, such as in fresh food prices and energy prices, as well as in import prices that are affected by changes in foreign exchange rates. 1. considerations regarding the economic outlook i consider that japan ’ s economy is likely to continue growing generally at about the same level as the potential growth rate throughout the projection period that covers through fiscal 2018. in my view, however, risks are skewed to the downside, especially at the end of the projection period. i will now explain risks to the economic outlook to which i pay particular attention. a. overseas economies and exports points to be considered regarding overseas economies include ( 1 ) the u. s. fiscal policy and its global impact, ( 2 ) the possibility of protectionist policies spreading around the world, ( 3 ) china ’ s lagged response to structural problems such as excess debt and excess production capacity, and ( 4 ) the vulnerability of the banking sector in europe. among these, i am particularly paying attention to the u. s. fiscal policy and its global impact. since fall 2016, the possible implementation of large - scale fiscal policy in the united states has been factored into financial markets, which has in some way contributed to the improvement in the economic sentiment worldwide. however, the detail and scale of such fiscal policy are still unclear, and it may take considerable time for them to be revealed. moreover, reflecting the decline of the u. s. economy

##ewed with exports being highly concentrated in one or two sectors, and imports being very widely spread over a very large range of consumption, intermediate and capital goods. being export competitive, therefore, is vital to the existence of such small economies. cost factors, however, loom large because of economies of scale and scope. the tax base of small countries is by definition small, and the citizens of small countries have to pay, on average, higher taxes than larger countries, which can spread the taxes over a larger number of people. the level of efficiency in the use of resources in small countries must therefore be higher in small countries in order for their productive sectors to be competitive. the cost of infrastructure is reflected in higher debt servicing and therefore higher taxes. if one assumes that the private sector naturally has to carry higher tax burdens than individual citizens, then this is then reflected in their costs and in their competitiveness. this brings me to one of the two fundamental points i would like to make on this occasion. it is simply this, the government can only provide services which are paid for by its citizens, that is, the tax payers. when the government provides a service it can proceed along several paths. firstly, it can charge the full cost recovery, that is if the service cost $ 40 to provide, then that will be the fee. secondly, it can outsource the service to be provided by a private firm. in this case, the full fee will also have to be paid unless the government provides a subsidy. thirdly, the government can provide the service free of charge. in the cases of the subsidy and no charge, the question can then be asked, who pays? the simple answer to that is, the taxpayer. there is no free lunch. the dynamics of this issue resides in the fact that whenever the public service receives an increase in salaries, the cost of the service increases. a corresponding factor, of course, is the cost effective delivery of this service in order to support the competitiveness of the economy. governments have found themselves by default, and because of the pressures of the multiparty competitive political system, taking on much more than they can afford to. this is even more possible given the vulnerability of our economies to natural disaster, hurricanes, and income volatility. physical and social safety nets are very costly as the insurance cost when spread over small populations is very high. this springs from two factors. firstly, in a very small physical space any external