companies that have honed their skills and leaped to the world level and “ competitiveness in the field, ” or genbaryoku, that enabled a rapid recovery from the earthquake disaster. what is necessary for the revival of japan ’ s economy is that individual firms continue to meet challenges so that such underlying strength will be exerted as the strength of japan ’ s economy to the maximum extent. the first challenge is to utilize the wide trend of globalization ( chart 3 ). smes that started to export or make foreign direct investment have achieved a relatively high rate of productivity growth, compared with those that did not. in that regard, according to the white paper on small and medium enterprises, while the average productivity growth rate of smes that made foreign direct investment was about 1. 8 percent, the growth rate of those did not was about 1. 0 percent. utilization of imports, incorporation of inbound foreign tourists, utilization of foreign personnel, and transactions with foreign firms are also effective ways to utilize globalization. with an increasing unification of markets at home and abroad, there are plenty of catalysts for growth around us in terms of personnel and goods. the second challenge is to tap domestic demand ( chart 4 ). while various areas, including environment and energy, can be considered, aging and the demographic vortex are also creating great business opportunities. looking at the entry rate of smes by industry, recently, the entry rate has been relatively high in such industries as medical and welfare services, in addition to information and communications, diet, accommodations, and education and learning support that have started to incorporate the elderly as new customers. people who were called baby - boomers are known to have a high propensity to consume, compared with the previous or next generations. inclusive of such generation, now called the “ active seniors, ” those 60 years old or older already account for more than 40 percent of private consumption. in meeting new challenges, it is important to utilize the strength unique to smes. merits of smes are “ quick in decision - making ” and “ can turn on a dime. ” because of their small size, smes can make bold decisions according to changes in the surrounding environment, and thus have potential for a great leap forward. “ able to make finely - tuned responses ” is also a merit of smes. i have heard that, as aging progresses, the locally - based business of providing services by visiting homes has been received well. such face - to - face business is

commodity - exporting economies, and reconstruction - related demand after the earthquake disaster increases. uncertainties about the outlook such economic outlook is associated with various uncertainties. today, i will point out three uncertainties that require special attention. the first uncertainty surrounds developments in overseas economies, especially the european economy. thanks to massive liquidity provision by the european central bank and financial support to greece, the possibility that the european debt problem will induce turmoil in global financial and capital markets through funding problems of financial institutions has at least lessened. however, it is not yet known whether european peripheral countries can smoothly carry out more drastic measures of fiscal and economic structural reform. recently, bis central bankers ’ speeches spain ’ s struggle with fiscal reform has started to be recognized as a new destabilizing factor to financial and capital markets. the second uncertainty surrounds developments in international commodity prices, including crude oil prices. a rise in crude oil prices will put downward pressure on japanese firms ’ profits and households ’ real purchasing power. if inflationary pressure increases globally, we cannot rule out the possibility that overseas economies, in which some improvement has started to be seen, will slow down again. the third uncertainty surrounds the domestic electricity situation. the electric power supply and demand situation might become increasingly severe, mainly during the summer. there is also a problem of an increase in electricity costs associated with a shift to thermal power. those will increase future uncertainty particularly for the smes, which lack self - defense tools including privately - owned electrical power facilities. if the severe electricity situation becomes protracted, it may become an incentive for firms, which aim at the optimal division of labor at home and abroad, to expand production and business overseas. unless alternative domestic production is generated, japan ’ s growth potential might decline. in relation to the first uncertainty about developments in overseas economies, let me touch on developments in foreign exchange markets. while the yen has been weakening somewhat since february, it remains at a substantially high level compared with that prior to the lehman shock. that is because global investors have become increasingly risk averse partly in response to the lehman shock and the ensuing aggravated european debt problem, and have thus purchased assets including the yen, which were considered to be relatively safe. in the current phase of high uncertainty about the outlook for overseas economies, the bank believes special attention should be paid to the possibility that the yen ’ s appreciation will have a negative impact on japan ’ s economy through a decline in exports and corporate profits as well as a worsening