- provisioning to support strengthening the foundations for economic growth the “ comprehensive easing ” i have described can be considered as a policy, when a decline in future demand is worried but is expected to pick up after some time, to support such return of the demand or to underpin the demand by powerful monetary easing. the challenges japan ’ s economy is faced with are not only the temporary decline in demand. it faces the medium - to long - term challenge of overcoming the trend decline in the growth rate that would still remain even after the temporary decline in demand is resolved. in other words, elevating the economy in a sustainable manner is considered to be an important challenge. taking the developments after the lehman shock as an example, demand declined rapidly and temporarily due partly to inventory adjustments, but picked up as time passed. on the other hand, global demand for, for example, automobiles, which had been at a high level amid the “ credit bubble ” in the united states prior to the lehman shock, will not pick up so easily. in the world following the burst of the credit bubble, to return to the previous high level and to further grow, there is no choice but to increase the strength for growth through the efforts such as further innovation in product development and sales network formulation. on the basis of such recognition, the bank introduced the “ fundprovisioning measure to support strengthening the foundations for economic growth. ” in what follows, i will explain my views about the background against which the bank introduced the measure. let me first overview the changes in the environment surrounding japan ’ s economy. japan has been faced with the low birth rate and the aging population for a long period. meanwhile, emerging economies, especially in asia, have been growing rapidly. therefore, the main demand has shifted from the youth and middle - aged to the aged people, and from advanced to emerging economies, and it has been required to establish a supply system of products and services that could meet such new demand. looking at the history of hit products as an example of such changes in demand, the main purchasers of the so - called 3cs – color television sets, air conditioners, and cars – were young couples and were a relatively homogeneous group. by contrast, recently, demand for low calorie foods preferred by elders and services that deliver purchased products to elders with weak mobility have been growing, and the purchasers have become heterogeneous. the development of information technology has also brought a significant environmental change.

had a solid theoretical foundation. ten years ago in june, i was, as an executive director of the bank, invited to the 50th anniversary meeting of the society and presented a speech titled “ missions and responsibilities of a central bank in a contemporary context. ” at that time, the economy was deteriorating following the bursting of the asset price bubble, and looking back, as i prepared my speech for today ’ s occasion, at the path trodden by japan ’ s economy over the last decade, i was impressed by the fact that the surrounding environment has become much more severe, although the basic mandate of the central bank, to maintain the stability of prices, has not changed in the least. even if we restrict our attention to the area of monetary policy, there have undoubtedly been a number of changes worthy of note. the first and most important of these is the change that has taken place in the financial environment, and here the substantial decline in interest rates is most notable. in fact, the level of interest rates was already low a decade ago, as the economy continued to deteriorate following the bursting of the asset price bubble, and weak balance sheets in both the corporate and financial sectors suggested that deep adjustments were inevitable. in these circumstances, the bank took a series of monetary easing measures, and the official discount rate had declined to the then unprecedented level of 1. 75 percent by the end of 1993. the same period saw a moderate decline in the overnight call rate to the range of 2. 0 - 2. 5 percent from 3. 5 - 4. 0 percent. at that time an official discount rate of 1. 75 percent was considered extremely low and was indeed the lowest level of this rate since the bank began operation in 1882, a period that included the financial crisis of 1927 and the fiscal expansion policy adopted by finance minister korekiyo takahashi in the 1930s. in retrospect, however, there was an enviable amount of room left for interest rate reductions, and hence interest rates were useful as policy tools. recently, in contrast, not only the overnight call rate but almost all money market rates have declined to a level close to zero percent. moreover, since spring 2001, the bank has moved into territory unexplored by any central bank in history by implementing quantitative easing with interest rates already at the zero bound. i stated at my inaugural press conference that a central bank conducting monetary policy with very little room left for interest rate reductions is like a boxer fighting with his hands