the number of workers by increasing labor market flexibility so as to ( 1 ) reduce labor market mismatch, that is, situations where those wanting to work cannot find a job ; ( 2 ) promote employment of those aged 65 and over that have left the workforce ; and ( 3 ) promote employment of women who left the labor market when getting married or giving birth but want to work again. although some deregulation and investment in infrastructure with the aim of improving labor market conditions has already been undertaken, i believe that more effective measures than those implemented to date are required. next, what steps should be taken to improve labor productivity? before the onset of the two lost decades, japan enjoyed high growth in a favorable environment that, in addition to the increase in the labor force, included the following. first, japan benefited from the latecomer advantage and was able to learn from the growth process of the advanced economies of the united states and europe. and second, japanese manufactured goods enjoyed a superior competitive edge in the absence of rivals other than the united states and europe. however, since then, having caught up with the united states and europe and finding itself pursued by emerging economies that have become rival producers of manufactured goods, japan has been forced to transform its catch - up growth model. going forward, japan needs to adapt to changes in the environment and open up new growth markets in such a way as to enhance its own growth potential. on this basis, the question arises as to what kind of measures should be taken. the government ’ s “ strategy for rebirth of japan ” states that, as part of its efforts to further strengthen economic growth, emphasis should be placed on the following areas : ( 1 ) promoting economic partnerships and harnessing global growth ; ( 2 ) creating new industries and new markets in response to changes in the environment ; ( 3 ) revitalizing financial markets through new capital flows ; ( 4 ) revitalizing the food, agriculture, forestry, and fisheries industries ; and ( 5 ) promoting tourism. as there is insufficient time today to cover all of these areas, i will focus on the following issues : ( 1 ) exploiting business opportunities arising from the aging of society ; ( 2 ) adjusting the business environment to better adapt to globalization ; and ( 3 ) increasing the number of foreign visitors to japan. the first issue concerns business opportunities relating to the aging of society. given the declining birthrate and rapid aging of the population, the market for products and services for the elderly is certain

will initiate the momentum for an economic recovery in japan. however, a self - sustaining recovery in domestic demand is unlikely to gain momentum for some time, since production is expected to be virtually unchanged for the time being while downward pressures such as excessive labor input and debt persist. as for the outlook for the external environment, although the downside risk has subsided slightly with the sars epidemic coming to an end, there still continues to be substantial uncertainty about the recovery of the u. s. economy. on the domestic side, the recovery in stock prices is a positive factor. however, given the fragility of the financial system, attention should be paid to the possibility of a further upsurge in long - term interest rates and its influences. on the price front, import prices and domestic corporate goods prices are declining, mainly reflecting crude oil prices that fell back in early spring. corporate services prices continue a year - on - year this report is based on data and information available at the time of the bank of japan monetary policy meeting held on july 14 and 15, 2003. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on july 14 and 15, 2003 as the basis for monetary policy decisions. decrease of slightly over 1 percent ; the rate of decline expanded in april, as many firms reprice at the beginning of a new fiscal year. the rate of decline in consumer prices remains virtually unchanged from april, when the rate diminished due mainly to the rise in medical treatment costs in line with the reform of the medical insurance system. looking at the conditions influencing price developments, import prices are expected to continue declining for the immediate future, but are likely to stop declining before long since crude oil prices have recently been firm after they fell back in early spring. on the other hand, turning to the domestic side, the supply - demand balance in the macroeconomy, ongoing technological innovations in machinery, and the streamlining of distribution channels will continue to exert downward pressure on prices. in addition, the increase in domestic commodity prices has peaked out. based on these factors, domestic corporate goods prices are likely to continue declining. meanwhile, consumer prices are projected to continue falling at the current moderate pace on a year - on - year basis. as for the financial environment, the outstanding balance of current accounts at the bank of japan is moving at around 29 trillion yen, as the bank has been providing ample liquidity. under these circumstances, the