2010 ( chart 2 ). rapid population aging second, japan ’ s population has continued to age rapidly ( chart 4 ). the working - age population, or in other words the population aged from 15 to 64, has been declining after peaking in 1995. the working - age population in 2010 declined by 7 percent compared to 15 years previously in 1995, or by 0. 5 percent on a yearly basis. meanwhile, the percentage of people 65 or older accounted for about 15 percent of the total population in 1995, but rose to about 25 percent in 2010. this globally unprecedented rapid population aging has had far - reaching and various effects on japan ’ s economy. the first of these effects is on the economy ’ s potential growth rate. the working - age population plays a central role in economic activity. its decline has reduced labor supply and thus has pushed down economic growth. the second effect is on the fiscal balance. at a time when it has become difficult to increase tax revenues through labor income, pressure has been increasing to expand the fiscal deficit, given that social security expenses – including pension costs and medical and nursing care expenses – increase as the population ages as long as the current level of benefits are maintained. the third effect is the diversification of consumer needs and services. given the diverse lives and lifestyles of the elderly population, individuals have a wide range of unique needs, not only in terms of medical and nursing care but also in wider contexts such as living fulfilling lives after retirement, which encompasses hobbies and continued learning. to put it another way, the continued population aging is, in a sense, a market expansion that cannot be considered in mass terms. japan ’ s delayed response to change we can see that the environment has changed significantly over the past 15 years, with globalization and rapid population aging. change at any point in time always provides a country with both difficulties and opportunities, and the capability of a society as a whole to adapt to this change largely affects its economic performance. on this point, both japan ’ s government and its firms have responded in various ways. unfortunately, however, the economic growth rate has continued to decline and prices have continued to fall moderately bis central bankers ’ speeches as a result. furthermore, government debt has increased substantially during this period. faced with these facts, we cannot deny that japan ’ s economic system has not managed to respond swiftly and sufficiently to the big changes in the environment. one reason for the decline in the growth rate is the aftereffects of the

condition is attached to the commitment, that is to say, the bank will continue the virtually zero interest rate policy “ on condition that no problem is identified in examining risk factors, including the accumulation of financial imbalances ”. in practice, however, detecting the accumulation of financial imbalances is not an easy task. in searching for early warning indicators for financial crises, vigorous research has been done globally at various institutions such as the imf and bis as well as central banks, including us. the results of those efforts have shown that, for the purpose of detecting financial crises, it is useful to assess the degree of financial excesses by monitoring indicators such as asset prices, credit aggregate, total investment, and residential bis central bankers ’ speeches investment, most typically their deviation from a trend. the bank has established a framework to regularly check such indicators in the conduct of monetary policy. while developing analytical tools devoted to the conduct of monetary policy, the bank has also been making efforts to better analyze and assess risks across the entire financial system. specifically, it has produced diversified stress scenarios as part of macro stress testing and developed the new financial macroeconometric model to analyze the feedback process in which stress exerted on economic conditions and asset prices spreads to the real economy through the behavioral changes of financial institutions. the bank has also been developing indicators useful in analyzing excessive credit expansion and the financial sector ’ s risk - taking, as well as in detecting signs of instability in the financial system. these new tools and assessments were incorporated in our financial system report published in october, which is available at our web site. the bank also attempts to further promote concerted efforts between these assessments of financial system stability and monetary policy making. the recent economic outlook released in october and subsequent policy judgments reflect these new developments from macroprudential perspectives. closing remarks let me conclude. i have described the importance of a macroprudential perspective in the conduct of monetary policy and the bank of japan has been making certain efforts in this regard. however, i should admit that these are only partially completed and we should keep up our endeavor. in the aftermath of the global crisis, each country has implemented various policy reforms based on similar grounds. i would like to finish by expressing my sincere hope that a policy framework to prevent future crises will be further established worldwide in the coming period, through sharing experiences at various gatherings such as this conference. thank you very much. bis central bankers ’ speeches