area in the past for most african central banks due to the region ’ s relatively low credit depth and its lack of large, sophisticated financial markets. but the rapid development of the financial sector, the growing interconnectedness of the countries ’ banking systems, and the gradual opening of their capital markets has necessitated an increased focus on financial stability. the imf recently found evidence of linkages – in particular in the case of sub - saharan africa countries – between lower commodity prices and financial stability metrics, such as non - bis central bankers ’ speeches performing bank loans, returns on equity, and ratios of liquid assets to deposits. despite these linkages, it is evident that a growing financial system which is well regulated and supervised is likely to result in better allocation of capital to different economic sectors, the facilitation of entrepreneurship, stronger job creation and, overall, the promotion of sustainable economic development. dealing with challenges – the experience of the south african reserve bank the global challenges described above, and the questions of how to deal with them, have not spared the south african reserve bank. south african growth has slowed due to various external factors, not least due to the worsening terms of trade on the back of softer commodity prices. it is worth noting that commodity exports continue to represent about 60 per cent of south africa ’ s external trade but trade is increasingly shifting to other emerging - market economies, for example export shipments to china and the other brics countries have risen from 2, 6 and 3, 0 per cent in 2005 to 9, 6 and 5, 2 per cent in 2014 respectively. these external factors have been compounded by domestic supply issues, prominent among which were electricity constraints, prolonged strikes in the mining and manufacturing sectors as well as skills shortages and uncertainties in certain fields of policy, such as the mining and agricultural sectors. the south african reserve bank forecasts gdp growth of 1, 5 per cent this year and 1, 6 per cent next year, which is substantially lower than the post - recession high of 3, 2 per cent in 2011. the bank further estimates that a part of this deterioration may be structural and that potential economic growth has slowed from around 3 to 3, 5 per cent in 20105 to about 1, 8 per cent this year. inflation continues to remain of some concern, even as growth slowed and the persistence of a negative output gap seemingly dampened the pass - through effects of currency depreciation to headline cpi inflation. core consumer price increases have remained relatively elevated

background that the core consumer price index is still registering a small decline in recent months, while the corporate goods price index is rising moderately. under the present circumstances, the bank of japan has two tasks to achieve simultaneously : first, put japan ’ s economy on a sustainable growth track by maximizing the new dynamism in our economy ; and second, end deflation entirely. this is my new year message to those who are particularly interested in japan ’ s economy. as i said a few minutes ago, i have come to this city to commemorate the 100th anniversary of our new york office. i have learned that japan society will also mark its 100th anniversary in two years, meaning boj new york office and japan society are almost the same age. actually, the general manager of our new york office 98 years ago - mr. eijiro ono - was involved in organizing japan society. with this in mind, please allow me, for the moment, to talk about the early days of both japan society and the bank of japan ’ s new york office, that is, the early 20th century. japan society came into being in 1907 to promote friendly relations between our two nations. many prominent leaders from both sides of the pacific ocean contributed to the establishment of this important forum. this was almost 50 years after japan had opened its doors to the western world, when commodore perry arrived on japan ’ s shores to seek diplomatic relations between our countries. japan society was formed when our bilateral relationship was becoming closer, but sometimes tense due to the vagaries of international geopolitics in those days. as is often said, there was a bit of ambivalence in us - japan relations. on the positive side, the united states was most helpful in guiding japan towards successful modernization. we especially owed a great deal to us assistance in the process of industrialization. trade linkages between the two countries were growing stronger year by year. at the same time, the downside of our deepening ties was emerging around the turn of the century. a rift appeared in parallel with the palpable increase in japan ’ s military power in the pacific and japan ’ s surprising victory over russia in 1905. set against this backdrop, it was natural for the united states to see japan as a rising power in asia, with the potential to challenge us primacy in this geo - politically complex region. japan society was born out of this delicate international context. it was expected to perform a dual function - that is,