more robust than the previous two recoveries because this time cyclical factors in the domestic economy, such as inventory and fixed investment, are gaining momentum. ii. sustainability of recovery and risk factors private forecasts of real gdp growth for fiscal 2003 and 2004 are generally lower than the bank's forecast in the mid - 2 percent range for both years as presented in outlook and risk assessment of the economy and prices ( hereafter the outlook report ) in october 2003. however, private forecasts for fiscal 2003 are currently being revised upward. this is because the annualized growth rate of real gdp increased by 1. 4 percent in the july - september quarter, higher than private forecasts of zero percent or a slight increase based on the slowdown in private consumption due to the cool summer. after revision, real gdp growth for fiscal 2003 may reach close to 2. 7 percent, which is the highest among the nine board members'forecasts in the outlook report published in october. one of the reasons why private forecasts for fiscal 2004 are more pessimistic than the bank's forecast is that they anticipate inventory adjustment or a slowdown in business fixed investment. as i mentioned, the current recovery is fairly robust thanks to the favorable impact of the cyclical upturn in inventory and fixed investment. in fact, the more than 10 percent annualized rate of increase in exports during the july - september quarter is supporting the growth of industrial production. another reason for pessimistic private forecasts is that the u. s. economy may rapidly slow down in mid - 2004 after the effects of recent tax cuts have run their course. however, labor productivity growth has been quite remarkable, recording 7. 0 percent and 9. 4 percent on an annualized basis in the second and third quarters of fiscal 2003, respectively. of course, such rapid growth will not be ever - lasting, but it is expected to remain relatively high for all industries, including services industries, in the fourth quarter and thereafter. productivity growth would improve corporate profits, which would not only finance business fixed investment but also contribute to an increase in wages. an increase in total household assets aided by a rise in employment and wages as well as in stock prices could offset the waning effect of tax cuts in the middle of next year. thus, the u. s. economy is highly likely to continue growing at around 4 percent from the fourth quarter of this year through the end of next year. china and other asian economies are

( conducted in december 2011 and february 2012 ), resumption of the securities markets programme ( smp ), reducing the reserve ratio, a cut in key interest rates, and modification of collateral requirements. in july this year, moreover, the ecb cut key interest rates by another 25 basis points : the interest rate on the main refinancing operations was reduced from 1 percent to the historically lowest figure of 0. 75 percent, that on the marginal lending facility from 1. 75 percent to 1. 5 percent, and that on the deposit facility from 0. 25 percent to 0 percent. these actions helped lower the short - term interest rates in the euro - denominated money markets and moderated tensions in the area ’ s financial markets. the yields on long - term sovereign bonds have also declined in the whole euro area, including the peripheral countries. a decline in bank lending rates has also followed in line with the decrease in yields. nonetheless, the scale of the decline in those rates for the peripheral countries has not been sufficiently large to narrow the gap with those rates in the core countries ( chart 1 ). this is mainly because the vicious cycles between sovereign and financial stresses – and bis central bankers ’ speeches their repercussions on the real economy – have not been curtailed in the peripheral countries. the high bank lending rates in the peripheral countries are closely associated with the highrisk premiums charged on the yields on their sovereign bonds by investors. given that these premiums are far above those justified by the economic fundamentals, according to an estimate by the organisation for economic co - operation and development ( oecd ) ( chart 2 ), they could be called a “ fear premium ”. the international monetary fund ( imf, 2012 ) also reports that these premiums are predominantly driven by a common factor rather than country - specific macro / liquidity risks. as long as there is the fear of possible reversibility of the euro – even in a situation where the expected probability of that tail - risk scenario is extremely low – the ecb will find it very difficult to lower the yields on sovereign bonds of these peripheral countries on a sustainable basis. the fear premium has also promoted fragmentation of the financial markets within the euro area by discouraging cross - border financing activities in the private - sector between the core and peripheral countries. this has resulted in greater dependence of the financial sector in the peripheral countries on the ecb ’ s refinancing operations, or emergency