of 2012 as exports and production decreased mainly reflecting the deceleration in overseas economies, which in turn adversely affected domestic demand such as business fixed investment in the manufacturing sector. economic conditions, however, have become favorable since the beginning of 2013. recently, domestic demand, in particular public investment and private consumption, has been firm, exports have been picking up in a situation where overseas economies are gradually heading toward a pick - up, and industrial production is increasing moderately. against this backdrop, the june 2013 tankan ( shortterm economic survey of enterprises in japan ) showed a significant improvement in business sentiment not only in the manufacturing sector, which has greatly benefited from the correction of the yen ’ s appreciation, but also across a wide range of other sectors including nonmanufacturing, as well as upward revisions in firms ’ business forecasts such as with regard to profits and fixed investment. taking into account that the level of economic activity had been rising moderately and a virtuous cycle from income to spending had gradually started operating, the bank of japan, at the monetary policy meeting held on july 10 and 11, 2013, raised its basic assessment of the domestic economy, from the assessment that the economy “ has been picking up ” to the assessment that it “ is starting to recover moderately. ” as for the outlook, exports are expected to increase moderately, mainly reflecting the pick - up in overseas economies and the correction of the yen ’ s appreciation. as for domestic demand, public investment and housing investment are expected to continue trending upward, business fixed investment is projected to increase moderately reflecting the improvement in corporate profits and the employment situation, and private consumption is expected to remain resilient. in this situation, industrial production is also expected to increase moderately, judging from interviews with firms and other relevant information. against the backdrop of these developments in demand both at home and abroad as well as in production, japan ’ s economy is expected to recover moderately. let me elaborate on these developments for a moment. due in part to the correction of the yen ’ s appreciation and the rise in stock prices since the end of 2012, business and consumer sentiment has improved, and this improvement is likely to help underpin private consumption for the time being and gradually entice firms to increase their spending. increased private consumption is particularly evident among the middle - aged and the elderly, who hold more stocks than other age groups. consumption activity of the baby - boom generation is expected to remain firm due to their higher propens

at manageable levels is essential to ensuring sustainable economic growth. we will maintain our policy of a market - determined exchange rate, with official action only to keep volatilities at bay. we will stick to the policies that have allowed us to sustain a strong external position. we will continue to review our banking reform agenda. the banking system strength that we have seen thus far has been made possible by the reforms that we have put in place. we will continue to enhance risk management standards, improve corporate governance and accelerate compliance with basel 2 principles. the recent events in the financial markets highlight the critical importance of efficient price discovery, transparency and investor protection. in line with this, our issuance of regulations aimed at further broadening the array of financial products available in the market will continue to include a review of existing rules to ensure that appropriate risk disclosure and client suitability procedures are in place for new risk - taking activities. in addition, the bsp will continue to work together with the private sector and other government agencies to further enhance both the infrastructure and the regulatory framework for capital market transactions to further promote efficiency in trading, settlement and delivery of government securities. finally, we will pursue our legislative agenda. as you must be aware, the credit information system act and the personal equity and retirement account act have both recently been approved. these are two very important pieces of legislation, particularly as we face the challenges brought about the current financial turmoil. the cisa will help address the lack of comprehensive and credible credit - related information. this will in turn improve access to credit and reduce its cost. pera, on the other hand, is expected to promote voluntary savings and therewith provide a new base for stepping up capital market development. it is also expected to be complementary to our public pension system. the bsp will continue to work with congress on key legislation that would further enhance protection for investors, improve bsp ’ s oversight capabilities and minimize costs of resolutions. concluding remarks ladies and gentlemen, the challenges that we face are enormous. although much has already been revealed in terms of the problem areas of the global financial market turmoil, we are very much aware that more could be forthcoming. i said earlier, “ the rules of the game are changing ”. fortunately, at the uaap, the rules have not changed, the best still prevails. i can almost hear some of you say underneath your breaths – if indeed that is the case, then we should “ throw the playbook out the window.