lehman shock, japan ’ s economy faced a series of headwinds such as the great east japan earthquake and the flooding in thailand in 2011, as well as the deceleration of the chinese economy from 2012. however, it has overcome such shocks and a path toward a self - sustained recovery is finally in view. a high degree of uncertainty remains concerning the global economy, and i see risks to the economic outlook as somewhat tilted to the downside. however, the external environment as a whole is expected to exert positive effects on japan ’ s economy unless a tail risk affecting the global economy emerges. therefore, i believe that the present offers a window of opportunity for japan ’ s economy to overcome deflation ( chart 14 ). exports had lagged behind domestic demand, which has started to increase its resilience, but have been picking up led by exports of automobiles to the united states. production of manufacturing firms followed a moderate increasing trend in the april - june quarter of 2013, and is expected to continue to do so in the july - september quarter judging from interviews with firms ( chart 15 ). although the deceleration of the chinese economy – which i will discuss later – is a major concern, it is not a serious obstacle to the recovery of japan ’ s economy as long as the robustness of the u. s. economy is maintained. private consumption for the january - march quarter of 2013 seemed to be supported by an improvement in sentiment and wealth effects. private consumption is expected to continue increasing, as household sentiment has remained firm on the whole even amid the recent turmoil in financial markets, and as the employment and income situation improves moderately ( chart 16 ). according to anecdotal information, negative effects on consumption of high - end goods and services have not been observed to a large degree despite the recent turmoil in financial markets. the contribution of public investment to the economy is expected to increase again from the july - september quarter, supported by the effects of various economic measures ( chart 17 ). in these circumstances, coincident indicators of machinery investment – such as shipments of capital goods and the aggregate supply of capital goods – suggest that business fixed investment, which had been sluggish, is finally showing some signs of picking up from the april - june quarter. investment for energy - saving and disaster prevention as well as pent - up demand for maintenance and replacement of business equipment seem to be emerging ( chart 18 ). business fixed investment is expected to bis central bankers ’ speeches

##qe differs completely from the bank ’ s other monetary easing policies adopted in the past in the sense that ( 1 ) the bank had adopted the stance of pursuing bold monetary easing all at once to achieve the price stability target of 2 percent in about two years and to avoid an incremental approach ; and ( 2 ) by doing so, the bank aims to exert influence on the expectations of firms and households as well as financial markets. the former policy stance of avoiding an incremental approach is based on the lessons learned from the fact that japan ’ s economy could not overcome deflation, even though the bank had continued to fine - tune its policies under the framework of comprehensive monetary easing in accordance with the economic cycle. therefore, this policy stance should be regarded as a serious one. the latter policy stance of aiming to exert influence on the expectations of firms and households as well as financial markets is associated with the former policy stance. the bank aims to drastically change such expectations by implementing all possible measures called for at the time. to do so, it is important to first implement bold monetary easing measures that go beyond market expectations and then bis central bankers ’ speeches carefully monitor their effects, rather than adopting measures in a piecemeal manner, which would have adverse effects. at the same time, the bank does not exclude the implementation of additional measures and will not hesitate to fine - tune its policies flexibly when unexpected tail risks materialize. the policy stance of the bank that i have just described is not necessarily fully understood yet by market participants. therefore, the bank should provide a thorough explanation to the public of its policy stance through various communication channels, including dialogue with market participants. g. the meaning of the 2 percent price stability target i will now discuss my understanding of the price stability target of 2 percent. generally, inflation - targeting policy is a flexible monetary policy framework and countries adopting it do not change their monetary policy stances mechanically in accordance with the achievement or undershooting of their targets. this understanding is widely shared by central banks that have adopted such a policy framework. i understand that the bank ’ s monetary policy framework – in which the bank sets the 2 percent price stability target – is a flexible one, in the sense that it focuses mainly on maintaining the 2 percent target in a stable manner rather than merely on achieving the target exactly ( chart 9 ). in terms of maintaining the target in a stable manner, it is almost impossible to stably maintain the inflation rate specifically at 2