was a global credit bubble. in the current conjuncture, the european debt problem is exerting an impact on the global economy, including the u. s. economy. as is evident from the fact that european financial institutions increased their exposure to u. s. financial products, the u. s. housing bubble and excess debts in europe are not independent from each other. thus, the balance - sheet repair in the united states might take some more time. it is sometimes pointed out that one of the differences between the two bubbles is the sector in which excess debt accumulated : the corporate sector in the case of japan and the household sector in the case of the united states. what matters in shaping the impact of balance - sheet repair on economic activity, however, is whether such an adjustment is taking place in a sector driving economic recovery. in this sense, there is no significant difference between the two cases because, while economic recovery in the past has been led by the corporate sector in japan, it has been driven by the household sector in the united states. an overall assessment of the differences seemingly indicates that the balance - sheet repair in the united states will likely end earlier than in the case of japan, and i do hope that is the case. in the end, i think that the most important factor determining economic developments following the bursting of a bubble is the economy ’ s capacity to develop a new growth model that best suits a changing economic environment. in the case of japan, its stagnant economic performance largely owed to its failure to adjust to economic globalization bis central bankers ’ speeches associated with the collapse of planned economies, especially the breaking up of the soviet union, as well as to the it revolution, both of which took place almost at the same time that japan ’ s bubble burst. in the current conjuncture, the most significant changes taking place on a global scale are the swift rise of emerging economies and the rapid aging of the population. respective corollaries to these changes are a rise in international commodity prices and a deterioration in the fiscal balance. while japan has had a tough time trying to develop a new growth model in response to these changes, we do have some strengths in this regard. first, japan is located in asia, the engine of global economic growth. second, it has a high level of technological prowess, which is necessary when adjusting to a rise in energy prices. third, as they have faced the problem of an aging population ahead of the rest of the world,

states ’ share of 15 percent marks it as the second largest destination for japan ’ s exports, after china ’ s 19 percent. moreover, it appears that a large portion of the exports to china is eventually sent on to the united states after going through the assembly process in china. as a destination for u. s. exports, japan has a share of 5 percent, which is the second largest after china when excluding the nafta countries. as you can see by the example of apple ’ s iphone, for which japanese manufacturers produce more than 30 percent of the components, the industries of japan and the united states are indeed closely connected ( chart 4 ). in terms of international investment, the share of the united states as a destination for outstanding foreign direct investment from japan is the largest, at 30 percent ( chart 5 ). the share of the united states with respect to outstanding inward foreign direct investment to japan is also the largest, at 34 percent. from the other side of the picture, the share of japan in terms of outstanding inward direct investment to the united states is the second bis central bankers ’ speeches largest, at 11 percent, after the u. k. ’ s 20 percent. looking at securities investment, japan ’ s u. s. treasury holdings of 0. 9 trillion u. s. dollars represent a share of 20 percent, second to china ’ s holdings of 1. 2 trillion u. s. dollars, which give it a share of 26 percent. japan ’ s economy after the bursting of a bubble second, i would like to highlight some facts about the current state of japan ’ s economy. with regard to growth rates, to our regret, it is hard to claim that our performance has been remarkable, and our experience has often been referred to in a negative context in recent years as “ a lost decade ” ( chart 6 ). having said this, although our gdp growth rates have been on a declining trend, the average growth rate of gdp per capita in the past decade is almost the same as the average for the g - 7 countries. moreover, it is surprisingly not well known even among japanese people that japan recorded the highest growth rate among the g - 7 countries in terms of gdp per working - age population – that is, the population aged between 15 and 64 years. needless to say, japan has confronted a number of difficult challenges, just like other countries. in fact, there has been a series of problems in the past quarter century, including the forming