sustained recovery are expected to continue. while the pace of improvement is likely to slow temporarily, partly due to a temporary slowdown of overseas economies and the waning effects of various demand - boosting policy measures, exports are likely to increase, reflecting the high growth in emerging economies such as in china, while business fixed investment and private consumption are expected to recover as corporate profits increase. as noted earlier, a downside risk that might necessitate revision of the above outlook is the growing possibility that the u. s. economy will see protracted low growth. were this to happen, the outlook for the world economy would have to be revised downward. the resulting decrease in exports would adversely affect japan ’ s economy and probably lead to increased risk aversion, thereby discouraging business fixed investment, new businesses, and household consumption. the deteriorating business and consumer sentiment could lead to prolonged sluggish economic activity. despite the manifest downside risks outlined above, the emerging economies have shown impressive growth. it is true that, for the present, the economies of some asian economies appear to be decelerating, mainly because of china ’ s economic slowdown. yet this means that the risk is declining that an overheating economy might hurt sustainable economic growth. this might be compared to “ speed control, ” conducted for a limited period to ensure a higher rate of growth over the long term. if this were the case, it would be an upside risk for japan ’ s economic outlook, given that japan is strengthening its ties with other asian countries. an upswing in these countries could partly offset the negative effects even if the u. s. economy experiences a period of low growth. d. effects of foreign exchange markets on japan ’ s economy next, in order to understand the effects foreign exchange markets have on japan ’ s economy, let me put the activities of foreign exchange markets in context. when prices of goods are stable or falling in a given country, the value of that nation ’ s currency is stable or rising and, other things being equal, the value of this particular currency should rise against other currencies. this is the basic idea of “ purchasing power parity. ” so, if we look at the purchasing power parity of the yen against the u. s. dollar ( the ratio between prices in japan and the united states ), we see that the yen has been appreciating fairly consistently against the dollar, reflecting the weakness in japanese prices relative to those in

the overhead costs, ie the operational or hr costs. and it ’ s about the time that needs to be devoted to these matters – which is time no longer available to deal with clients, to conduct credit analysis or to develop investment strategies. this means that the problem is not so much the minimum capital or liquidity requirements but instead the high operational burden imposed by implementation and compliance. second, as a result of the complex regulations, it is becoming ever more difficult for new institutions to enter the market. this could significantly impact the competitive dynamics and innovativeness of the bank and savings bank sector. that ’ s all i want to say for now on the effects of complex rules on institutions. but this complexity affects supervisors, too, of course. one interesting take on the matter comes from a couple of experts at the bank of england. 1 they believe that complexity fails to provide ag haldane and v madouros ( 2012 ), the dog and the frisbee. speech delivered at the federal reserve bank of kansas city ’ s 366th economic policy symposium in jackson hole, wyoming on 31 august 2012 ; d aikman, m galesic, g gigerenzer, s kapadia, k katsikopoulos, a kothiyal, e murphy and t neumann ( 2014 ), taking uncertainty seriously : simplicity versus complexity in financial regulation. bis central bankers ’ speeches absolute security, because gaps can always emerge elsewhere. in addition, regulation ties up human resources because of the dense blanket of rules that need to be enforced. in england it is recognised that there is therefore a danger of supervisors following a ticked - box approach rather than carrying out a critical examination. i think this reasoning touches on a rather sore point – it is, of course, true that complexity ties up vast amounts of our regulatory resources. sometimes a simple rule would perhaps be just as effective, but less costly. however, overall i come to a different conclusion. namely, that complex regulation with multiple safety nets – such as the risk - weighted approaches and the debt ratio – are a good alternative to simple rules. at this juncture, schimanski would probably conclude that while the supervisor ’ s attack was perhaps a little heavy - handed, it wasn ’ t deadly. and, what ’ s more, the supervisor ’ s selfinterest in having complex rules is very limited, so this scarcely cuts the mustard as a motive for murder. inspector schimanski would therefore have to carry out further