subdued inflation. as a result, debate has been often framed in terms of a trade - off between price stability and financial system stability. however, the true trade - off is not between price stability and financial system stability, but it exists intertemporally between economic stability of the present and that in the future. although ensuring the soundness of individual financial institutions through regulation and supervision is surely important, the sound management efforts at a micro level may not be sufficient to guarantee the financial system stability. from a macro - perspective, however, if we maintain a monetary policy that accommodates excessive leverage and maturity mismatches over the longer term, someone will eventually take excessive risk, and this will lead to an erosion of financial system stability. that is why monetary policy, too, should be conducted with a macro - prudential perspective, aiming at sustainable price stability in the longer term. at the same time, we must avoid strengthening regulatory framework becomes an impediment to macroeconomic stability. in this sense, we must carefully assess the condition of global economy to determine the timing for implementing the strengthened capital standards. for this, as declared in the statement of the g20 pittsburgh summit in september, it is necessary for us to take an approach that strengthening of the capital standards should be implemented as economic recovery is assured. balance between regulation and self - discipline second, balance is needed between regulation applied to financial institutions on the one hand, and management and self - discipline by financial institutions themselves on the other. financial markets are ever - changing and business models differ across institutions. given the limited resources of supervisors and regulators, it is impossible to supervise or regulate every inch of the activities of financial institutions. moreover, given the limited liability of shareholders, the myopic behavior of shareholders and managers cannot be restrained simply by enhancing minimum capital ratio standards or through other regulations. before the emergence of the subprime loan problem, most financial institutions were well - capitalized in terms of the regulatory definition of capital. of course, we can say this is owing to the deficiency of the current capital regulation. that is, risks are not adequately captured in the calculation of the capital ratios. at the same time, however, this seems to suggest how intrinsically difficult it is to capture risk correctly in a timely manner. after all, the first line of defense of a financial institution is its managers whose task is to properly identify and manage risks to ensure the financial soundness of their institutions. on a related issue, the

rates of investment trusts and pecuniary trusts have been at high levels, indicating that money holders such as households have been increasing their risk assets. as i have described, accommodative financial conditions seem to have recently been effectively stimulating private demand, and such conditions appear to be forming the basis bis central bankers ’ speeches for japan ’ s economy to overcome the negative effects of the consumption tax hikes and for a virtuous cycle among production, income, and spending to operate firmly. ii. developments in economic activity and prices a. overseas economies next, i will talk about developments in economic activity and prices. overseas economies – mainly advanced economies – are starting to recover, although the performance remains lackluster in some parts. the growth rate of the global economy in 2014, released in january by the international monetary fund ( imf ), is projected to accelerate to 3. 7 percent from 3. 0 percent for 2013. naturally, the growth rates in emerging and commodity - exporting economies are higher than those in advanced economies. however, advanced economies are projected to show stronger growth momentum than emerging and commodity - exporting economies in 2014, compared to a year earlier. among advanced economies, the growth rate of the u. s. economy is projected to accelerate in 2014 compared to the previous year. inevitably the growth rate of the u. s. economy in the january – march quarter of 2014 will be adversely affected by the record winter snowstorm since december 2013. however, in a situation where balance - sheet adjustments in the household sector seem to have mostly been completed and the fiscal drag has faded, production and private demand are expected to remain firm and the economic recovery is expected to become widespread from the spring. with regard to the employment situation, although some current data showed weakness reflecting the effects of the winter snowstorm, the improving trend remained, as evidenced by a declining trend in the unemployment rate. as for the euro area, in 2014 the economy is projected to emerge from negative growth. concerns persist over further disinflation, but business and household sentiment continues to improve in a situation where financial markets have stabilized, and production has been picking up, albeit moderately. whereas improvements are observed in advanced economies as i described, the situation varies among emerging and commodity - exporting economies. first, the chinese economy has continued to see stable growth, albeit at a slower pace than before, maintaining a yearon - year growth rate of 7. 5 – 8. 0 percent in the