of fiscal policy since the start of 2013. this indicates that the macroeconomic fundamentals have been strengthening. in may and june 2013, federal reserve board chairman ben bernanke indicated the possibility of tapering the monthly 85 billion u. s. dollar bond purchase program by late this year as long as the federal reserve observes continued, sustainable improvement. some presidents of regional federal reserve banks have suggested the same possibility. while these remarks are thought to have raised the awareness of many market participants about the direction of the federal reserve ’ s monetary policy toward the exit, the fact that economic data are mixed has led to divergent views on the timing of the tapering process. this seems to have contributed to amplifying the volatility of u. s. long - term interest rates, stock prices, and the exchange rate of the dollar, thereby affecting the government bond, stock, and foreign exchange markets in japan and other economies ( charts 4 and 5 ). the second factor at play is that the market environment has been gradually changing in japan. in the past, long - term interest rates and volatility remained at low levels. however, since the introduction of qqe, some market participants have promptly adopted new investment strategies by taking into account the possibility of future inflation, while others have taken a wait - and - see attitude, and these divergent strategies and attitudes appear to be reflected on the movements of long - term interest rates. meanwhile, the transaction volume of jgbs has not declined significantly, except during early april. nor have bid - ask spreads been particularly high in light of historical levels. at the same time, however, it has been pointed out that fewer market makers are standing behind their bid and ask quotes, and so the execution of large - scale transactions at the same ( preferred ) prices as before has become difficult. in other words, transaction costs have increased and the price - discovery function has weakened somewhat. moreover, an indicator of market liquidity – defined as the ratio of the daily price range to the transaction volume – has reached relatively high levels ( chart 6 ). the third factor at play, which is related to the second factor, arises from the fact that market participants have significantly different views on the impact of qqe in terms of the degree to which it will affect long - term interest rates, and the speed. some believe that yields will rise relatively quickly, while others expect a gradual increase. this divergence may have contributed to the volatility

whole, which has been showing clear recovery. the share of manufacturing in this prefecture is larger than that in the country overall. electronic parts and devices – which face a decline in orders due to increased competition with foreign manufacturers and to sluggish sales of final products – account for a large share of manufacturing in the prefecture. accordingly, the industrial production index for this prefecture has been below that for the whole country as a trend, albeit with some fluctuations due to the front - loaded increase in demand prior to the bis central bankers ’ speeches consumption tax hike ( chart 15 ). considering that japan ’ s current economic recovery is characterized as being led mainly by nonmanufacturing, the large share of manufacturing in the prefecture ’ s industrial structure might be the reason for the sluggish recovery compared with that of the country as a whole. it also should be noted that positive developments have been spreading. anecdotal information suggests that, although private consumption – mainly apparel, high - end goods, furniture, and household electrical appliances – has been affected by the reactionary decline in demand following the front - loaded increase prior to the consumption tax hike, the decline is not significant despite a larger - than - expected front - loaded increase in demand. private consumption is therefore likely to remain resilient in a situation where labor supply and demand conditions continue to improve. business fixed investment will likely expand significantly in nonmanufacturing, due, for example, to new construction of large distribution sites and to an extensive renovation of a new commercial complex, which will open at kyushu railway company ’ s oita station. such investment is also scheduled to start increasing in manufacturing owing to positive developments such as the establishment of new production lines for some new products, in addition to a rebound from the decline observed in fiscal 2013. from the medium - to long - term perspective, it is encouraging that the private and public sectors are making joint efforts that make the most of regional characteristics. i would like to give two examples. first, joint efforts have been made in the field of renewable energy. oita prefecture is a frontrunner in japan in this field, being ranked first in terms of the selfsufficiency rate of such energy and taking second place in terms of the supply amount. after the great east japan earthquake, entry into the power generation business using renewable energy sources in the prefecture has become active, due in part to the introduction of the country ’ s feed - in tariff scheme for renewable energy. in particular,