- financial enterprises. accordingly, investment and trading strategies have also become more diverse. in particular, let me focus on the changing nature of index investment. it is true that a significant proportion of investment is still tied to strategies which replicate major indices by investing in the front end of the curve and passively rolling into the next contract each month. however, some managers are adopting so - called “ enhanced ” index strategies, which may entail positions on various parts of the curve or allow investments in subsets of commodities. 2 etf sponsors have also diversified their investment strategies. etf sponsors, especially in the case of etfs linked to the price of precious metals, typically take long positions in commodity spot markets under so - called physical etf schemes. however, we have seen the emergence of synthetic etfs, that is, etfs backed by derivatives. under synthetic etf schemes, etf sponsors often engage in total return swaps or commodity futures to issue etfs linked to major indices. they also use other types of derivatives to issue complex products such as short etfs and leveraged etfs, although their presence is still limited at this stage. turning to other participants, hedge funds typically take both long and short positions for arbitrage purposes or based on macro - economic views. ctas trade in futures markets and often employ technically - based trading strategies such as trend following strategies. more recently, some ctas have become increasingly involved in algorithmic and high - frequency trading ( hft ). this is often described as a response to changes in the shape of futures curves and / or a crowding out of investor activities in some part of the curves. bis central bankers ’ speeches the growing participation of financial investors in commodity futures markets may also affect spot markets. in particular, several leading commercial and investment banks have become increasingly active in some physical markets, providing liquidity to their clients through arbitrage between physical and financial markets. there seems to be a variety of motives behind the growing investment in commodities. some investors view commodities as an effective tool in hedging against inflation. institutional investors with a long - term investment horizon have been attracted by the diversification benefits for portfolio rebalancing and high convenience yields. furthermore, some investors consider commodity investments as a proxy for investment in rapidly growing emerging market economies. investable assets in these economies are still limited. thus, in order to gain exposure to these rapidly growing emerging market economies, some investors turn to commodity investments correlated strongly with growth

asset price and financial market developments are eventually critical factors which have a decisive influence on the resilience of the recovery of domestic private demand. firms and households can only reactivate spending such as investment and consumption when clear prospects of a demand recovery following the resolution of various structural problems are in sight, future uncertainties with respect to employment and wages are dissolved, and a stable financial environment is in place. such thinking again highlights the importance of structural reform, through which resources will be efficiently reallocated and growth potential strengthened. as assumed in the standard scenario, our economy is expected to stop deteriorating led mainly by improved exports and production, but there still remain various structural adjustment pressures. in other words, cyclical factors and structural factors are locked in battle. i will now address this issue. business cycle and structural problem cyclical recovery and structural problem although our economy has followed a daunting road since the 1990s after the bursting of the bubble, there were some periods when the economy expanded. according to the government ’ s official business cycle turning point, there were two recovery phases : from the end of 1993 and also the beginning of 1999. during the former, after experiencing a temporary standstill due to effects stemming from the rapid appreciation of the yen in spring 1995, the economy realized more than 3 % growth in 1996. in retrospect, the economy entered a recovery phase triggered by monetary easing and fiscal expansion after the bursting of the bubble, followed by an increase in personal consumption and capital investment partly supported by the prevalence of mobile phones and personal computers. the economy rapidly deteriorated in the latter half of 1997 against the backdrop of a slowdown in overseas economies due to the asian crisis, increased uncertainty with respect to the domestic financial system, and downward pressure from the fiscal front. the next recovery phase, from the beginning of 1999 to the latter half of 2000, is still clear in our memories. against the backdrop of the global boom of information technology ( it ), exports played a leading role and capital investment centering on it - related industries also increased. however, since adjustment pressure in the it - related area had intensified worldwide before domestic consumption, another engine of the economy, gained momentum, japan ’ s economy deteriorated again after entering 2001. what the two recovery phases in the 1990s have in common is that although the economy started to recover there was no autonomous and sustainable expansion of private demand as a whole. this was principally because the economy was directly hit by a cyclical slowdown in overseas economies and was