view of innovation, the challenging spirit of enterprises is all the more important. more concretely, it is necessary for firms to switch their fundamental strategy from the “ red ocean strategy ”, under which they continue price competition in the shrinking markets, to the “ blue ocean strategy ”, under which they create new markets and provide high value - added. if firms are successful in raising profitability not by cutting costs but by generating value - added, they can pay higher wages to their employees. subsequently, consumers will have higher incentives to purchase valueadded goods and services ; hence, a virtuous circle prevails. the role of financial institutions to support such firms ’ efforts is also important. in order to lay the foundation for firms to demonstrate their spirit of challenge, such government initiatives as deregulation are also important. i understand that such initiatives will move forward steadily through the launch of the comprehensive strategy for the rebirth of japan, by mid - 2012. ultimately, these reforms will only move forward with the help of the general public ’ s understanding. in this sense, it is important to build a society, which accepts the economy ’ s metabolism as a concept of values, promotes deregulation to support such metabolism, and provides the safety net that enables entities to embark on a renewed challenge. i have touched on the roles of firms, financial institutions, and the government, as well as the general public ’ s understanding. for our part, the bank continues to make its utmost effort to overcome deflation and return to a sustainable growth path with price stability. as for problems accompanying the aging of the population, please see masaaki shirakawa, “ demographic changes and macroeconomic performance : japanese experiences ” ( opening remark at 2012 boj - imes conference hosted by the institute for monetary and economic studies, the bank of japan ), may 30, 2012. http : / / www. boj. or. jp / en / announcements / press / koen _ 2012 / data / ko120530a1. pdf bis central bankers ’ speeches concluding remarks the world now faces a big challenge. each country, including the united states, those in europe, and those in emerging economies, also faces respective challenges. japan is by no means an exception. there is commonality among the challenges each country faces, but there also are differences. over the past quarter of a century, japan has gone through a number of challenges : the emergence and bursting of the bubble, the outbreak of

toward a pick - up phase. reflecting these economic developments, gradual changes in prices start to emerge ( chart 1 ). deflation is often referred to when discussing developments in japan ’ s economy. as for the consumer price index ( cpi, all items less fresh food ), the year - on - year rate of change registered minus 2. 4 percent in august 2009. thereafter, the rate of decline moderated at a steady pace, recovering to 0 percent in fiscal 2011. the year - on - year rate of change in the cpi for the past two months, for which data is available, registered 0. 2 percent. looking at a breakdown by item, the rates of change are negative for items that are infrequently purchased and for which prices have declined substantially as a result of technological innovation, such as personal computers and televisions, whereas they are around 1. 9 percent for those purchased more than about once a month. focusing solely on items closely related to consumers ’ daily lives, such as food, the year - on - year rate of change has more clearly entered positive territory than in the case of other items. bis central bankers ’ speeches baseline scenario for the outlook through fiscal 2013 next, i would like to talk about the outlook for economic activity and prices. at the monetary policy meeting ( mpm ) held at the end of april, the bank released its assessment of the outlook through fiscal 2013. an economic outlook undoubtedly entails various uncertainties and depends on relevant assumptions. the most important assumption made in the latest outlook rules out the possibility that an extreme intensification of the european debt problem would trigger a significant downturn in the global economy through the turmoil in global financial markets. on this basis, in the baseline scenario – that is, the scenario for economic activity and prices considered to be the most likely by the bank – japan ’ s economy is expected to return to a sustainable growth path with price stability in the longer run. more specifically, the economy is expected to return to a moderate recovery path in the first half of fiscal 2012 as the pace of recovery in overseas economies picks up, led by emerging and commodity - exporting economies, and as reconstruction - related demand after the earthquake disaster gradually strengthens. in terms of figures, the growth rate of real gdp is projected to be 2. 3 percent and 1. 7 percent for fiscal 2012 and 2013, respectively. concerning prices, as the level of economic activity continues to rise moderately, the year - on - year rate