growth potential of japan ’ s economy lies in improving labor productivity in service industries by, for example, offering unique and highvalue - added services. this should be combined with efforts to increase employment by further tapping potential demand and improving labor productivity to create a virtuous cycle. based on considerations such as these, the japanese government has formulated a growth strategy and has actively been taking related measures. recognizing the importance of strengthening japan ’ s growth potential, the bank introduced the fund - provisioning measure to support strengthening the foundations for economic growth in june 2010 and has since enhanced the measure. i will elaborate on this later when i explain the bank ’ s conduct of monetary policy. together with the strenuous efforts undertaken by firms, the support provided by the bank from the financial side, including the provision of funds to areas with growth potential, can help us to overcome deflation. in order to achieve this, it is also necessary for the government to create the right environment. with this in mind, the bank will continue exerting itself in its role together with firms, financial institutions, and the government. c. efforts to ensure fiscal sustainability alongside strengthening japan ’ s growth potential, a key issue that needs to be addressed is ensuring the sustainability of the public finances. japan ’ s government debt outstanding exceeds 200 percent of nominal gdp, which is the highest level among advanced economies. nevertheless, yields on government bonds remain stable at low levels. this is often explained by the fact that japan has a current account surplus and a large portion of government bonds are held by domestic investors. it should be noted, however, that, as the european debt crisis shows, once market participants start doubting the government ’ s determination to work toward fiscal sustainability, the situation could change in a nonlinear fashion. given that social security spending will continue to exert upward pressure on fiscal expenditure, it is necessary to push ahead with structural reform of the public finances in terms of both expenditure and revenue while the public still has confidence in fiscal discipline. iv. monetary policy a. the conduct of monetary policy i would now like to turn to the bank ’ s conduct of monetary policy. the bank recognizes that japan ’ s economy is faced with the extremely important challenge of emerging from deflation and returning to a sustainable growth path with price stability. based on this recognition, the bank has been consistently making contributions as the central bank, using a three - pronged approach consisting of ( 1 ) pursuing powerful monetary easing under the comprehensive monetary easing policy

, and thus cause unwanted market reactions. the current monetary policy normalization is unprecedented, and well - structured communication ( providing guidance on how the central bank will proceed ) is needed to smooth the process. i believe that forward guidance has become an effective supplement to conventional tools ; should we need another monetary easing cycle soon, conventional instruments would arguably play a less prominent role than in previous downturns. to wrap up, i think it is safe to say that central bank communication has become a proper monetary policy tool. the statements following monetary policy meetings in every major central bank gather a substantial attention, and watchers analyse every sentence – down to the last word. 3 / 4 bis central bankers'speeches consequently, any change in communication – either what is said or what is left unsaid – is immediately noticed and widely interpreted. to water down the statements into less detailed, more “ reserved ” language would be, in my opinion, going backwards in terms of the pursuit of greater transparency and credibility. it is worth bearing in mind that the latter is directly linked to achieving the core price stability target. thank you. 4 / 4 bis central bankers'speeches