robust. in the high - growth era during the 1960s and the stable growth period from 1970 to the 1980s, the japanese economy was blessed externally with an international competitive environment that was beneficial to japan ’ s economic model designed to catch up with advanced economies, and internally, with an upward trend in the working - age population. 9 from the 1990s onward, however, international competition intensified and the working - age population started to decrease. as a result, growth had to be based increasingly on a “ pioneering spirit, ” that is, the ability to discover hitherto unknown demand and create new markets. thus, the main reason for japan ’ s decline in productivity and in the economic growth trend has been an inability to cope with fundamental structural changes in the world economy. how should japan address these challenges? it is clear that the expanding global economy provides ample potential demand, particularly in emerging economies. though less obvious, it is also true that there are no limits to demand at home. statistics show that there remains an output gap in japan. this gap, however, only shows the size of the shortage in demand relative to the current supply capacity. looked at from a different angle, this simply means there is a shortage of the kind of supply that meets the kind of latent demand which is there. let me be more specific. although the aging of society has generated wide - ranging potential demand for medical and nursing care as well as demand in other related areas, a regulatory framework that is rooted in japan ’ s traditional economic system has hindered potential demand from materializing. thus, it could be said that the ability to “ pioneer ” i mentioned earlier requires economic actors capable of tapping potential demand and a nation that provides an institutional environment encouraging the production of valuable goods and services through free market competition. with regard to overseas markets, it is important for japan to open up and steer boldly toward the objective of integrating domestic and overseas markets. needless to say, this challenge needs to be tackled immediately so as not to miss out on the enormous demand for goods and services in expanding global markets. at the same time, this greater integration with the global economy would allow the free movement not only of goods and services but also of human resources and capital, and would both require and promote deregulation. while it may sound a bit hyperbolic, such integration could further advance the international division of labor to an extent where the distinction between domestic and foreign demand becomes irrelevant except for statistical expedience. another pressing issue is

of the fund - provisioning measure is as follows : ( 1 ) the total amount of loans shall not exceed 3 trillion yen ; ( 2 ) the total amount of loans to each counterparty shall not exceed 150 billion yen ; and ( 3 ) the last disbursement of new loans shall take place by june 30, 2012. the bank is aware that it is not possible to raise japan ’ s growth potential solely through this fund - provisioning measure. rather, the aim is for the measure to act as a catalyst to bring about a shared awareness among financial institutions and firms on the need to raise japan ’ s growth potential and to make various efforts of their own accord to raise the potential economic growth rate and productivity. on march 7, 2011, the bank will carry out the third new loan disbursement under the fund - provisioning measure to support strengthening the foundations for economic growth, and the total outstanding balance is expected to exceed 2 trillion yen as of march 7. the number of borrower financial institutions11 has increased to 149 as of the end of february 2011, and the breakdown of these institutions reveals that loans will be provided to various types of institutions across wide regions. individual investments and loans under the measure cover all of the 18 areas suggested by the bank as possible investment areas, with investment in “ environment and energy business ” in the lead. in this context, what has particularly caught my attention is that a large number of financial institutions, on participating in the bank ’ s disbursement of loans, started to actively make a range of efforts such as establishing new dedicated funds and lending schemes for investments and loans to support strengthening the foundations for economic growth. the bank believes that this situation suggests that the bank ’ s measure is producing positive effects as a catalyst, its intended purpose. b. future monetary policy conduct and communication in order for japan ’ s economy to overcome deflation and return to a sustainable growth path with price stability, i believe it is important for the bank to steadily continue to carry out the measures i mentioned earlier. in addition, the bank will continue to carefully examine new economic data and information, so that appropriate policy measures can be taken flexibly if the probability rises of a significant deterioration in the outlook for economic activity and prices or it becomes uncertain that japan is on the road to overcoming deflation. in order for these measures to be fully effective, it is vital that they are properly and widely understood by the public. to this end, the bank holds meetings