deflation. next, i would like to present the results of the opinion survey on the general public ’ s views and behavior. the bank conducts this survey on a quarterly basis, based on the responses collected from individuals who are chosen through a stratified two - stage random sampling method. this survey is an opinion poll designed to gain insight into the general public ’ s perceptions on their household circumstances, including questions with regard to the perception of price levels ( chart 14 ). according to recent survey results, among the respondents who felt that prices have gone up, more than 80 percent viewed the price rise as “ rather unfavorable ”. in contrast, among the respondents who felt that prices have gone down, about one third of them deemed the price decline as “ rather favorable ”. while the exact number changes from one survey to the next, the responses have tended to be rather stable. reading the newspaper, in contrast, one often comes across an article stressing the necessity to overcome deflation and representing this as the voice of the general public in japan. given that deflation is a state in which prices keep declining, these two outcomes are inconsistent with each other. how can we reconcile these outcomes? in my view, the answer lies in the fact that “ deflation ” means different things to different people. some use this terminology in the context of consecutive declines in prices, while others believe it means deteriorating economic activity and the rest view it as declining wages. there are even those who use deflation in the context of falling asset prices. according to the opinion survey that i have just mentioned, most japanese people are not hoping that prices would simply rise. if prices rise while real gdp remains stagnant, this will lead to higher nominal gdp, which represents a situation where costs rise in a number of items and cost - push inflation prevails. this does not lead to a higher living standard. in the minds of most people, overcoming deflation is not simply a state in which prices rise in general, but rather one where better economic conditions are realized by increasing corporate profits, employment, and income. in economists ’ jargon, it represents a rise in the real gdp growth rate. when the real gdp growth rate rises, the demand and supply balance improves, generating upward pressure on prices and wiping out deflation. the question is how to raise the real gdp growth rate. there is a combination of forces that needs to be addressed : first, strengthening the economy ’ s growth potential

in such a short time. while a difficult task, the european monetary union has progressed over the years under the grand vision to realize peace, prosperity, and stability in the region through political and economic integration. in order to realize this vision, a strong political will is imperative. i sincerely hope that the european authorities – by taking advantage of the responsiveness that has been nurtured and the mutual trust that has been established through the course of history in europe – will take bold measures to address the fundamental problem. iv. growth potential japan ’ s growth potential so far, i have addressed the issue of overseas economies. i would now like to change the subject to the domestic economy and present the third topic : japan ’ s growth potential, or potential growth rate. to have some idea of where the potential growth rate lies is vital both in terms of making policies and managing firms. this is because the output gap of japan ’ s economy has tightened to about – 2 percent at present, and the economic growth rate over the next 10 or 20 years is largely underpinned by the potential growth rate. both monetary policy and fiscal policy are aimed at stimulating demand by closing the output gap, and neither is quite able to raise potential growth. to understand potential growth, let us look back at the long time - series of real gdp growth rates in japan. while it was around 4. 4 percent in the 1980s, real gdp declined gradually, reaching around 1. 5 percent in the 1990s and around 0. 6 percent in the 2000s ( chart 12 ). the real gdp growth rate can be decomposed into the growth rate of the workforce and the bis central bankers ’ speeches growth rate of real per capita gdp, i. e., the growth rate of value - added productivity. the decline in real gdp from the 1980s to the 1990s owes much to the declining growth rate of value - added productivity ( chart 13 ). this is mainly due to the remnants of the bubble ; in other words, economic activity stagnated during the course of removing excesses in terms of business equipment and debts that had accumulated during the bubble period. however, its decline from the 1990s to the 2000s owes much to the fact that the working - age population started to decrease, rather than increase, while the growth rate of value - added productivity stopped declining. the decline in the workforce reflects the rapid aging of the population that is in progress. what is going to happen in the next 10 years? assuming that the labor participation of