power to support economic activity of firms and households, the potential economic stimulus effects of low interest rates tend to increase as the economic environment improves. in october this year, the bank expressed again its aim to maintain the extremely accommodative financial environment and provide steady support for japan ’ s economy, and i will emphasize again today that the bank firmly maintains such a stance. the bank will thoroughly check the future developments in the economy and prices and take appropriate policy responses to bring japan ’ s economy back to a sustainable growth path with price stability. in terms of the effects of monetary easing, it is important to ensure the stability of financial markets. to ensure the stability of the financial markets is a responsibility as a central bank, and i will reemphasize that the bank is always prepared to act promptly and decisively if judged necessary to ensure the stability of financial markets. iv. responses to deflation in relation to the policy management, i will now describe the basic thinking on coping with the issue of deflation. as previously mentioned, the bank has been doing its utmost as a central bank to meet the challenge of getting out of the state of continued decline of prices, namely, deflation, and put japan ’ s economy back to a sustainable growth path with price stability, and made it clear to continue with such stance. to begin with, at the root of a continued decline in prices, there is a fundamental factor that demand is weak compared with the supply capacity of the economy as a whole. the starting point of the current price decline was the rapid contraction of financial and economic activities since the autumn of last year, and, as a result, the supply and demand balance deteriorated significantly. in order to deal with such situation, it is necessary to prepare an environment conducive to a sustainable expansion of final demand, such as business fixed investment and private consumption. in other words, on a policy front, it becomes critical to make households feel secure about their future and firms able to have expectations about the future growth. at the same time, as long as there will be no recurrence of the excessive booms in the united states and europe, it will be essential also for firms to convert their supply system into a new one that is in line with consumers ’ needs in a new era. as such, steady efforts on the part of the policy authorities as well as the private economic entities are necessary for coping with the issue of deflation, and such a process necessarily takes some

the supplying capacity of the same products in the past. in that context, the oft - discussed output gap seems to have an aspect of an indicator of the mismatch between supply and demand. what is important is the corporate effort to make potential needs into actual demand. in addition, to support such firms ’ efforts, the systems or mechanisms should be reviewed so as to ensure the flexibility of japan ’ s economic structure according to the changes in society and in the global economy. for example, the rate of establishment of new firms and the rate of closure of the existing firms in japan are less than half of those in the united states, suggesting that the metabolism of japan ’ s economy is low. while consideration from various angles would be necessary in order to improve such a situation and prepare a mechanism through which production resources transfer smoothly to areas with strong needs, from the standpoint of a central bank, i will emphasize the role of financial markets, financial institutions, and institutional investors. the financial markets facilitate an efficient fund allocation according to profitability and potential of firms as well as risks, thereby play a role in enhancing the metabolism of the economy. in that regard, a more efficient fund allocation will be possible if versatile markets exist and various fund providers assess the profitability of firms and others. therefore, to develop versatile and efficient financial markets is likely to play an important role also in raising the productivity of the economy as a whole. concluding remarks needless to say, economic growth is eventually achieved by the power of human will. in that regard, in nagoya, there are many firms that have taken various changes in the environment as new opportunities and have achieved high growth by responding to the changes. recently, there have been moves to develop and expand the production of high - value - added products including energy saving automobiles, which is reassuring. if such efforts are stepped up, it would pave the way to a sustained growth path for japan ’ s economy. the bank will do its utmost to support your such efforts from the standpoint of a central bank. thank you.