bank of japan ’ s august report of recent economic and financial developments1 bank of japan, 12 august 2002 * the bank ’ s view * * japan ’ s economy, despite persistent weakness in domestic demand and increasing uncertainty regarding the global economy, has almost stabilized as a whole with exports and production continuing to increase. with regard to final demand, business fixed investment continues to decrease and private consumption, despite some resilience, remains weak as a whole. moreover, housing investment remains sluggish and public investment continues to decline. meanwhile, net exports ( real exports minus real imports ) continue to increase significantly due to the recovery in overseas economies and also to the effects of restocking abroad, mainly in it - related goods. industrial production is picking up clearly in response to the upsurge in exports and adequate reduction of excess inventory stocks. against this background, corporate profits appear to have started to recover. in addition, the rebound in production is having effects on labor markets, albeit marginally, with an increase in overtime hours worked and in new job offers mainly for part - time workers. however, firms are still maintaining their stance on reducing personnel expenses and as a consequence, household income continues to decrease noticeably. thus, employment and income situation of households overall remains severe. turning to the economic outlook, the upward trend in exports is expected to continue against the background of the gradual recovery in overseas economies, although the pace is likely to slow as the impetus from overseas restocking weakens. thus, industrial production is expected to follow a gradual uptrend with some fluctuations in its pace. on the other hand, with respect to domestic demand, public investment is projected to follow a declining trend and private demand is likely to remain weak for the immediate future. yet, if the increase in exports and production mentioned above continues, the recovery in corporate profits will become distinct, and this will gradually bring a positive impact on domestic private demand. in fact, the decline in some leading indicators of business fixed investment has come to a halt. overall, it can be envisaged that the stabilization of japan ’ s economy will become more definite as the increase in exports and production, through the improvement in corporate profits, will underpin domestic private demand. however, considering that forces restraining the economy, such as excessive labor input and debt, are still persistently at work, momentum for a self - sustaining recovery will be subdued for some time. furthermore, stock prices in the u. s. and worldwide as well as

data coupling, the greater the network effects, thereby increasing benefits at an accelerated rate. while this in itself could yield large benefits to consumers, it could also cause new problems associated with monopolies or oligopolies, where one or a few entities have too strong a domination over data. we need to be aware that data monopoly can inhibit competition and innovation, and ultimately have a negative impact on consumer benefits. closing remarks finally, in the remaining time, i would like to touch upon central bank digital currency ( cbdc ). after the release of “ the bank of japan ’ s approach to central bank digital currency ” in october 2020, the bank of japan carried out proof of concept ( poc ) phase 1 from april 2021 to conduct experiments on the basic functions that are core to cbdc as a payment instrument. completing phase 1 as planned, next month we will move on to poc phase 2 in order to test the additional functions of cbdc. while there is no change in the bank ’ s stance that it currently has no plan to issue cbdc, we consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems. amid various new combinations that are being created in an increasingly digitalized society, the bank will continue to carefully consider the expected roles of central bank money for people ’ s lives today and in the future, drawing on the wisdom of various stakeholders both at home and abroad. i would like to close my remarks by expressing my hope that interactions between the participants at this year ’ s fin / sum will lead to many new combinations. thank you for your attention. 3 / 3 bis central bankers'speeches