18 note : in the left chart, figures exclude " finance and insurance. " figures from 2009 / q2 onward exclude " pure holding companies. " sources : ministry of finance ; cabinet office. chart 8 iii. toward sustaining a virtuous cycle active business fixed investment stance earned surplus, and cash and deposits cy 2010 average = 100 investment ratio % earned surplus cash and deposits investment / ( operating cash flows + personnel expenses ) cy 07 08 09 10 11 12 13 14 15 16 17 18 19 fy 85 notes : 1. figures exclude " finance and insurance. " notes : 2. in the right chart, operating cash flows = net income - dividends + depreciation expenses + δprovisions - δinventories - δtrade credits - δnet amount of other current assets. investment includes land purchasing expenses and excludes software and r & d investment. source : ministry of finance. chart 9 iii. toward sustaining a virtuous cycle developments in r & d investment 3. 0 chg. from fy 2009, tril. yen nonmanufacturing other manufacturing electrical machinery general - purpose, production, business - oriented machinery medicines transportation equipment total 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 fy 10 source : ministry of internal affairs and communications. chart 10 iii. toward sustaining a virtuous cycle reasons for it investment aggressive defensive prompt responses to changes in markets / customers regular system use of new technologies / updates products / services introduction of it to non - it business processes greater business efficiency / cost cut using it japan 2017 innovation in business models using it enhanced development of products / services using it japan 2013 expansion in firm size responses to laws and regulations united states 2013 enhanced analysis of customer behavior / markets using it expansion in business operations / product lines increasing sales increasing profits note : figures are based on the 2017 jeita / idc japan survey. source : jeita. chart 11 iii. toward sustaining a virtuous cycle basic research highly cited papers and r & d funds from firms to universities international comparison of r & d investment the number of highly cited papers the proportion of firms'r & d funds provided to universities ( % ) united states 38, 347 1. 1 china 28, 386 2. 7 united kingdom 8, 718 2. 0 germany 7, 591 3. 8 france 4, 716 1. 1 japan 3, 927 0. 7 ratio to

situation. the european economy also has continued to recover moderately, supported by an increase in private consumption. looking ahead, it is likely that advanced economies will continue to register firm growth. as for emerging economies, the chinese economy is likely to broadly follow a stable growth path as authorities proactively carry out both fiscal and financial measures to support economic activity, although the growth pace is expected to be somewhat slower than in the past. other emerging economies and commodity - exporting economies are expected to remain subdued for the time being, but growth rates are then likely to gradually increase, due mainly to the effects of the economic stimulus measures and the recovery in advanced economies. bis central bankers ’ speeches this is the baseline scenario for overseas economies, but risks are skewed to the downside. developments in emerging and commodity - exporting economies including china are still particularly uncertain. the fact that volatility in financial markets has not yet been dispelled also warrants attention. moreover, uncertainty over the timing of the next policy interest rate hike in the united states is affecting global financial markets, particularly emerging markets. in addition, there are various political risks such as the referendum in the united kingdom later this month regarding a so - called “ brexit ” – that is, whether britain should leave the european union ( eu ). going forward, the bank will need to continue to closely monitor whether these uncertainties surrounding overseas economies will either clear up or grow. corporate sector next, i will touch on japan ’ s economy. first, in the corporate sector, profits are at record levels ( chart 2 ). this is attributable to the fact that the real economy is improving and to factors such as the low crude oil prices and the past correction of the yen appreciation. the pace of improvement in corporate profits is expected to temporarily slow down, especially in the manufacturing sector, mainly because of the slowdown in overseas economies. however, corporate profits are projected to follow an improving trend, given that the past decline in crude oil prices will continue to have positive effects and the rise in demand at home and abroad is expected to raise sales volume growth. on the back of the high corporate profits, firms have maintained their positive stance toward fixed investment. figures on business fixed investment plans in the march 2016 tankan ( short - term economic survey of enterprises in japan ) show that investment by large firms is likely to have increased by about 10 percent on a year - on - year basis in fiscal 2015 and that by small