to the corporate sector. while production, exports, and business fixed investment have been solid, i have the impression that they are somewhat lacking in momentum. starting with business fixed investment, the bank of japan's september 2024 tankan ( short - term economic survey of enterprises in japan ) shows firms'appetite for such investment remains strong ; however, actual results suggest that fixed investment conditions have been mixed ( charts 2 and 3 ). in terms of specific business fixed investment projects, there has been a wide variety, including ( 1 ) those associated with manufacturers'moves to transfer their overseas production sites back home, reflecting the yen's depreciation and heightened concerns over economic security ; ( 2 ) investment in urban redevelopment projects ; and ( 3 ) climate change - related investment. moreover, given the historically low levels of real interest rates and the favorable business fixed investment environment that reflects strong business performance and steady stock prices, firms'fixed investment should increase further. why then have some firms been reluctant to make fixed investments? i would like to point out two contributing factors. first is the bottleneck in human resources ; there have been shortages of technical experts and the labor necessary for setting up facilities or constructing factories, stores, and other premises. this factor has also likely affected firms'production activity. that is, anecdotal information suggests that, due to severe labor shortages, firms have inevitably had to pursue business realignment and integration through such means as shifting production sites of unprofitable businesses to emerging economies with lower labor costs, or engaging in business restructuring by selling unproductive businesses to other firms, including foreign firms. in my view, this has resulted in the production index remaining below the pre - pandemic level. the second reason why firms have been reluctant to make fixed investment is high uncertainties regarding the outlook. for instance, firms'inflation outlook for general prices for five years ahead, as presented in the september 2024 tankan, shows that over 40 percent of firms responded that they " do not have clear views " on general prices because of high uncertainties over the outlook ( chart 4 ). this figure is considerably higher than past results. setting selling prices is one of the vital elements of a firm's business strategy. as is the case with general prices, if the future course of selling prices remains unpredictable, this also holds true for the outlook for corporate profits. in such a situation, firms are probably hesitant to make fixed investment as this will inevitably weigh on

to achieve the objective under the qqe, but it is a challenge that we must meet. bis central bankers ’ speeches as i will explain shortly, there is a limit to the extent to which a central bank can control the nominal long - term interest rates. therefore, the government ’ s efforts for fiscal consolidation are vital. they will become even more vital when deflation comes to an end and an eventual exit from deflation occurs. iii. importance of fiscal consolidation a. overcoming deflation and change in environment surrounding fiscal policy let me now explain why fiscal consolidation is important in order to overcome deflation. from an optimistic viewpoint, if the medium - to long - term growth expectations rise as a result of overcoming deflation, the fiscal structure remains solid despite a pick - up in nominal longterm rates. that is because tax revenue will increase as the nominal growth rate rises. the elasticity of tax revenue is generally high at the initial phase of economic expansion, and corporate tax is likely to contribute to a higher revenue. on the expenditure side, the pace of increase in the government ’ s interest payment costs will remain subdued for some time. that is due to the government ’ s debt management policy in which the average maturity has been extended, and the government has taken advantage of current easy monetary conditions. for reference, the average maturity of jgbs issued in fiscal 2014 will be eight years and five months. in light of weak credit demand under deflation, the government is now building a fiscal structure which is resilient against possible rate rises. coupled with the effects of the qqe, the government ’ s borrowing costs have stayed stably at around 1 percent. by extending the maturity of jgbs, the government in effect has been able to buy time on the liability side ( chart 5 ). such an optimistic view may entail a risk. the aging population will continue to put pressure on additional fiscal expenditure, such as increasing social security benefits. the aging will constrain the labor supply on the supply side, and change the demand structure of the economy as a whole. unless the economy responds to a change in the demand structure, it will reduce the potential to grow. if growth expectations do not rise materially due to the aging, the fiscal structure will remain vulnerable. taking account of such demographic changes, it is better to be conservative. in my judgment, the fiscal issue will remain even after we manage to overcome deflation. b. recent developments in balance of