reform : empirical evidence from oecd countries ”, oecd economics department working papers no 501 and agnello, l., castro, v., jalles, j. and r sousa ( 2015 ), “ what determines the likelihood of structural reforms? ”, european journal of political economy, 37 : 129 – 145. 13 see, for example, thompson, w. and r. price ( 2009 ), the political economy of reform : lessons from pensions, product markets and labour markets in ten oecd countries, oecd, paris, france. 14 gordon, r. ( 1996 ), “ macroeconomic policy in the presence of structural maladjustment ”, nber working paper series, no 5739. 7 / 7 bis central bankers'speeches

that the balance between overseas and domestic production will be maintained. in addition, as investment was reduced to the level below depreciation following the lehman shock, this in turn is currently encouraging replacement investment. it can also be expected that firms will add investment spending to restore and reconstruct disaster - stricken facilities as well as to strengthen their earthquake resistance. given the situation i have described, it would be no surprise if domestic business fixed investment, compared with firms ’ cash flows or depreciation costs, became more apparent, and thus potential demand for investment is likely to have accumulated accordingly. if actual investment has been contained even though firms ’ investment appetite has not declined, this might mean that firms have been deferring investment decisions because of sluggish stock prices, the yen ’ s appreciation, the slowdown in the global economy stemming from the european debt problem, and related uncertainty about the future. let me repeat that firms ’ forward - looking investment in projects that would enhance value - added is a major driving force in order to increase the growth potential of the economy and improve productivity. it would also contribute to overcoming deflation. whether firms ’ investment spending will steadily increase – at a pace consistent with their growth expectations, both at home and abroad, in a balanced manner – is vital for japan ’ s economy to achieve sustainable growth and overcome deflation. turning to price developments, the year - on - year rate of decline in the cpi ( all items less fresh food ) slowed at a moderate pace in 2011, reflecting the improvement in the aggregate supply and demand balance, and has been hovering around 0 percent since the summer of 2011. the baseline scenario of the outlook for prices projects that the current situation is likely to continue for the time being, but the year - on - year rate of change in the cpi will gradually turn positive as the aggregate supply and demand balance improves. while crude oil prices have recently been surging due partly to the situation in iran, the price levels of other commodities have not necessarily risen compared with 2011. as this seems to be consistent with the currently still - weak recovery of the global economy, upward pressure on crude oil prices might be temporary due to supply - side factors. since crude oil prices might remain high depending on developments in geopolitical risk, careful monitoring is required. ii. monetary policy a. conduct of monetary policy let me now discuss the bank ’ s enhancement of monetary easing decided in february 2012. at the monetary policy meeting held on february 13 and 14,