2018. aiming to prompt the convergence of inflation, in the medium term, towards rates of increase in prices that are below but close to 2 %. backing this trajectory is the foreseeable progressive widening of the output gap and the increase in labour costs observed in recent quarters. at this moment, once the eurosystem has ceased to acquire new assets under its purchase programme, the expansionary stance of the common monetary policy at the start of this year has been mainly determined by two developments : the ecb governing council ’ s announcement that interest rates would remain unchanged at least until the summer of 2019 ; and the reinvestment over a prolonged period ( in any event, for the time needed to prompt the sustainable convergence of inflation on its medium - term reference ) of the financial securities acquired under the ecb ’ s quantitative easing programme. 1. 2 the spanish economy : developments and outlook in this setting, in 2019 the spanish economy will remain on the expansionary course on which it embarked six years ago. but there will be a further easing in its growth rate, to 2. 2 %, compared with the increase of 2. 5 % estimated for 2018 ( see table 2 ). the expected slowdown is largely in response to the weaker international setting i mentioned earlier. nevertheless, the spanish economy has, in recent quarters, proven significantly resilient, slowing to a lesser degree than our main area of reference, namely the euro area. the contributing factors include, among others, the boost to household income arising from the entry into force, in the second half of 2018, of certain measures included in the draft budget for 2018. the continuation of the current upswing in 2019 will continue to rest on the expansion of domestic demand ( see chart 1 ). underpinning this will be : financial conditions that are expected to remain relatively favourable ; an improvement in the financial position of households and firms ; the gains in competitiveness observed throughout the recovery ; and the strength of the employment creation process. it is expected that employment creation will slow this year, partly owing to the lesser pace of activity, but also to the increase of more than 22 % in the national minimum wage. in any event, according to the banco de espana ’ s projections, the annual growth in numbers employed will stand at around 1. 6 % in 2019, providing for further reductions in the unemployment rate, to around 14 % at end - 2019 ( see chart 2 ). all told, there are grounds for a progressive slackening of

has both advantages and disadvantages, and how they each materialize differs depending on the phase and time horizon. after considering all these factors, the bank has concluded that, in the current time of high uncertainty regarding the future prospects of overseas economies, due attention is necessary to the risk that the yen ’ s appreciation will dampen future growth through a decline in exports and corporate profits as well as a deterioration in business sentiment. this is the very reason that the bank has embarked on monetary easing measures twice since this summer. the most debated issue at present with regard to the yen ’ s appreciation is the possibility that japan ’ s firms will accelerate their shift to overseas production, which may result in a hollowing - out of domestic industries. the trend of a rising share of overseas production among japanese firms can be basically understood as a part of firms ’ growth strategy to place production sites near markets that are experiencing rising demand, against the backdrop of a global shift of growth centers toward emerging economies. having said that, the timing of this global shift is also affected by foreign exchange rate developments. as you may recall, in the phase of significant yen depreciation toward the middle of the 2000s, the profitability of domestic production improved dramatically and firms started to refocus on domestic production while pausing their shift to overseas production. however, as the aftershocks of the collapse of lehman brothers and impact of the sovereign debt problem in europe have persisted, the yen has stayed at a higher level than the period before these problems emerged. given this development, firms are returning to the strategy of shifting production overseas that they had been pursuing in response to the expansion of global markets. therefore, during this period of transition in business strategy, the pace at which production is shifted overseas will generally accelerate compared to the past average. during this period, if the pace of this shift increases excessively, it may be difficult to create replacement job opportunities at home at a similar pace. moreover, if core companies and factories with long - term competitiveness move overseas, they are less likely to return home even with a correction in the yen ’ s appreciation. therefore, as well as the risks that i have pointed out so far, the impact of the recent appreciation of the yen on japan ’ s economy warrants due attention. at the same time, the appreciation of the yen also has advantages, including lower import costs for energy and materials, which increases the purchasing power of firms and households. after the earthquake, the trade balance turned negative due