and high inflation takes hold, this will have a negative impact on the economy. thus, in order to prevent such negative impact, it is important to act ahead of time. as asian emerging economies are the driving force behind global economic growth, attention is being paid to their potential future actions. lastly, european economies are recovering moderately led by exports, driven in particular by germany and other major economies. the rising inflation trend has become more pronounced and the european central bank has suggested a future policy rate rise. in some peripheral european countries that suffered fiscal problems, long - term interest rates have stayed high and uncertainty has remained elevated. c. japan ’ s economy in light of such recovery in the u. s. economy and high growth in asian emerging economies, the effects of inventory adjustments in it - related goods have run their course around the world. private consumption in japan is showing signs of picking up after suffering the reverse following the sharp increase seen previously. although this represents the judgment made prior to the earthquake, japan ’ s economy is getting out of the soft patch, driven in particular by the recovery in exports and production. looking at market developments prior to the earthquake, stock prices remained on an uptrend while the yen was in the range of 80 – 85 yen against the u. s. dollar. this is attributed to the fact that overseas stock prices, especially u. s. stock prices, rose in reflection of monetary easing in the united states, and that corporate profits and their cash flows improved substantially. on the other hand, the improvement seen in components related to domestic demand, such as business fixed investment and private consumption, and in the employment and income situation remained moderate. the pace of improvement in the output gap and price developments was generally moderate. just like in the united states, the channel through which the favorable performance in the corporate sector fed into the household sector seemed to be somewhat weak. the likely underlying mechanism is as follows. even if the economy were to achieve an export - led recovery, a rise in import costs due to the increase in commodity prices would cause the terms of trade to worsen and real income to be undermined. as a result, even if the gdp figure increased, gross domestic income ( gdi ) would not increase that much. for example, during the recovery phase in the 2000s – that is, during 2002 – 2007, before the lehman crisis – the real gdp growth rate was 1. 8 percent on average but the real gdi, excluding trading losses, remained

) corporate profits s. a., % s. a., ann., tril. yen ratio of current profits to sales ( all industries and enterprises, left scale ) private nonresidential investment ( sna, real, right scale ) - 5 - 10 - 15 y / y % chg. [UNK] & d investment fy [UNK] 2. 7 y / y % chg. [UNK] 3. 5 business fixed investment ( including land purchasing expenses ) cy 05 06 07 08 09 10 11 12 13 14 15 16 17 18 - 20 fy 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 1718 notes : 1. figures for ratio of current profits to sales are based on the financial statements statistics of corporations by industry, quarterly. excluding " finance and insurance. " notes : 2. figures for business fixed investment ( including land purchasing expenses ) and r & d investment are based on the plans as of june tankan in each fiscal year ( all enterprises ). sources : ministry of finance ; cabinet office ; bank of japan. chart 4 employment situation active job openings - toapplicants ratio 1. 8 unemployment rate s. a., ratio s. a., % 1. 6 1. 4 1. 2 1. 0 0. 8 0. 6 0. 4 cy 80 cy 80 15 18 15 18 sources : ministry of health, labour and welfare ; ministry of internal affairs and communications. chart 5 consumer prices y / y % chg. introduction of qqe ( april 2013 ) - 1 cpi ( all items less fresh food ) cpi ( all items less fresh food and energy ) - 2 cy 10 note : the cpi figures are adjusted for changes in the consumption tax rate. source : ministry of internal affairs and communications. chart 6 environment surrounding prices changes in prices ( tankan ) nominal wages di ( " rise " - " fall " ), % points y / y % chg. base pay increase for full - time employees change in output prices change in input prices scheduled cash earnings per fulltime employee introduction of qqe ( april 2013 ) - 10 - 20 - 30 - 40 cy 07 08 09 10 11 12 13 14 15 16 17 18 - 1 fy 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 notes : 1. figures in the left chart are those of all enterprises. notes : 2. in the right chart, the figure for scheduled cash earnings per full -