. rapid urbanisation underpins this growth. since 1990, the number of people living in cities in china and india has risen by roughly 500 million, the equivalent of housing the entire population of canada every 18 months ( chart 3 ). despite the current, sharp cyclical slowdowns in china and india, this secular process can be expected to continue for decades. so, even though history teaches that all booms are finite, with convergence to western levels of consumption still a long way off, the demand for commodities can be expected to remain robust and prices elevated. in canada, the impact of rising commodity prices has been reinforced by strong growth in the supply of some commodities. oil is now our most important commodity by value ( chart 4 ), with its share rising over the past 15 years from 18 per cent to 46 per cent of total canadian commodity production. the declining importance of manufacturing coinciding with this period of elevated commodity prices, the share of the manufacturing sector in canadian gdp has declined since the turn of the century from 18 per cent to around 11 per cent. for the promoters of dutch disease, this is the “ a - ha ” fact, with the coincidental relationship described as causal. with a broader view, however, it is evident that the decline in manufacturing is only partially in response to the rising exchange rate and, in fact, is part of a broad, secular trend across the advanced world ( chart 5 ). major forces of globalisation and technological change have dispersed manufacturing activity across borders, increasingly concentrating the highest value - added stages of production in advanced economies. in 1970, canada ’ s manufacturing - to - gdp ratio was 6 percentage points below the average of members of the organisation for economic co - operation and development ( oecd ). today, it is 3 percentage points behind. likewise, the share of jobs in manufacturing has declined, but not as steeply as it has in our commodity - importing neighbour to the south ( chart 6 ). although the adjustment has been difficult, it has occurred over a longer period of time than the boom in commodity prices and, in general, canada has not lost ground relative to other advanced economies. bis central bankers ’ speeches what drives the currency? the coincident strength of commodity prices and the canadian dollar in recent years has been treated by some as prima facie evidence of dutch disease in canada. but this diagnosis ignores the fact that the canadian dollar is influenced by a diverse set of factors. commodity prices do play a role

expected to increase moderately, but it is subject to various uncertainties. for example, with regard to the u. s. economic policies, heightened uncertainties concerning fiscal policy and the impact of the pace of the policy interest rate hike on global capital flows warrant attention. the following are also considered as risks : developments in emerging and commodity - exporting economies ; negotiations on the united kingdom ’ s exit from the european union ( eu ) and their effects ; prospects regarding the european debt problem, including the financial sector ; and geopolitical risks. if these risks were to materialize, they could exert downward pressure on economic activity. therefore, the bank will continue examining these developments thoroughly. ii. price developments and their outlook price developments let me move on to the price developments in japan. although energy prices had exerted downward pressure on prices since the second half of 2014, they have been pushing up prices reflecting a pick - up in crude oil prices since last spring. against this backdrop, the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food turned positive in january 2017 for the first time in 13 months, and rose to 0. 4 percent in may ( chart 7 ). nevertheless, when excluding the effects of energy prices, price developments in japan have been relatively weak. the year - on - year rate of increase in the cpi excluding fresh food and energy has remained on a decelerating trend after marking a peak of 1. 2 percent at end - 2015, and has been at around 0 percent lately. this is partly attributable to temporary factors such as a reduction in sales prices of and charges for mobile phones. however, as i will explain later, the fact that increases in wages and prices have been sluggish, despite tight labor market conditions and high corporate profits, also affects price developments. outlook for prices as i have explained, the recent developments in prices have been relatively weak. however, i believe that we can expect to see a turnaround in such developments going forward. specifically, the year - on - year rate of change in the cpi is likely to continue on an uptrend and increase toward 2 percent, which is the bank ’ s price stability target. this is expected to be realized through the following mechanism. first, prices of items such as processed food and daily necessities — which are responsive to economic activity — are likely to rise gradually as private consumption increases its resilience, and the