impact on financial market balance if the retirement age is raised is precisely opposite to the impact of cutting pension benefits. in the end, the fall in real interest would be either small or non - existent. in this calculation, an extra four years at the end of working life ( worldwide ) would be enough to neutralise the downward pressure of population ageing on real interest rates. these calculations are essentially a mental exercise and should not be taken literally. it is, however, clear that developments in pension savings and public pension systems are among the key factors that will shape the macroeconomics, supply of finance and the future of the financial markets. transparency and credibility of pension systems irrespective of how much future pensions end up being funded, balanced economic development requires two vital qualities of any pension scheme : transparency and credibility. transparency means that those covered by the scheme understand what sort of security it provides them and what it will cost them. pension schemes should be understandable – they should not mislead their customers to over - or under - estimate their pension security. this is, of course, obvious from a human and social perspective, but it is also important macroeconomically : misunderstandings will sooner or later come to light, and the result then could be sudden changes in people's savings and investment behaviour that could destabilise the financial markets. another important perspective, one regarding the credibility of the pension system, relates to the nature of contributions and incentive effects. in a credible, actuarily fair system, pension contributions accrue in full to augment the beneficiary's personal pension assets. they are in this respect equivalent to personal savings. this type of contribution does not have the unfavourable incentive effect of taxation. pension contributions only begin to take on the nature of tax when the system begins to move away from this ideal. the further a system departs from the credible, actuarily fair ideal, the more pension contributions become just another tax. juha kilponen – helvi kinnunen – antti ripatti : population ageing in a small open economy – some policy experiments with a tractable general equilibrium model, bank of finland discussion paper 28 / 2006 the message for policymakers preparing the reform of pension systems is clear : the goal has to be a clear and sustainable system. thus, on one hand the reform must guarantee the long - term sustainability of the system, while on the other hand providing people with a

china. in fact, the deterioration in chinese firms'sentiment toward business conditions, particularly those related to exports and imports, has been distinct. although no significant changes have been evidenced, for example, by chinese statistics on exports and imports, some have pointed out the possibility that china's trade activity has been buoyed temporarily by the front - loading of exports to the united states prior to a looming rise in tariffs. thus far, the effects of the u. s. - china trade friction on japan's economy have been limited. there is an argument, however, that if it takes time to ease this tension, this may result in a direct negative impact on japan's economy through trade activity, and may adversely affect the economy to a greater extent through such channels as the deterioration in business sentiment and the destabilization of global financial markets. the imf and other international organizations have released similar results in their simulation analyses on the effects of the u. s. - china trade friction on the global economy. according to these analyses, the extent to which this trade friction directly impacts the economy through trade activity is likely to be limited, but the effects of this issue would be larger when involving such channels as the deterioration in business sentiment and the destabilization of global financial markets. i believe that we should not be inclined toward extremely pessimistic views in this regard, mainly because an agreement has been reached in the renegotiation of the north american free trade agreement ( nafta ) and there has been ongoing dialogue between the united states and china toward easing the tension. however, i will continue to closely monitor the effects of protectionist moves on economic activity overseas and in japan. c. price developments next, i will turn to price developments in japan. the year - on - year rate of increase in the consumer price index ( cpi ) for all items less fresh food slowed temporarily in early spring 2018, but it has been accelerating again since summer, having risen to around 1 percent recently. nevertheless, the year - on - year rate of change in the cpi excluding energy in addition to fresh food has been at around 0. 5 percent of late, and the underlying trend in prices in japan has continued to show relatively weak developments compared to the economic expansion and the labor market tightening. this is likely to be attributable to two main factors. the first is the deeply entrenched mindset and behavior based on the assumption that wages and prices will not