begin to willingly accept the idea of moderately rising prices. this is the avenue that the change in price perception – that is, a rise in inflation expectations – will take in line with the economic reality, and this is the fundamental mechanism for overcoming deflation. after the lehman shock, wages have been relatively firm compared with the immediately preceding recovery phase, and we will monitor carefully how they feed into prices in the future ( chart 17 ). the ability to cultivate new demand derives from firms ’ spirit of challenge. at the same time, however, financial institutions need to support the funding of firms that exhibit risk - taking behavior arising from this spirit, and the government should lay out foundations such as expanding, through decisive deregulation, business areas for firms ; such efforts play pivotal roles in helping firms take on challenges. this recognition is shared by the government. at the monetary policy meeting held on october 30, in addition to the aggressive monetary easing, the bank decided to release the “ measures aimed at overcoming deflation ” jointly with the government in order to state clearly their shared understanding. in this “ shared understanding, ” the government showed a clear recognition that, in order to overcome deflation, it is essential to reform an economic structure that is predisposed to deflation, as well as conduct appropriate macroeconomic policy management. the bank strongly expects the government to vigorously promote measures for strengthening japan ’ s growth potential. of course, the bank will make its utmost efforts from the financial side. once various efforts by a wide range of economic entities come into play, i am confident that sustainable growth with price stability can be achieved. v. issues concerning the bank of japan ’ s conduct of monetary policy in the following, i will introduce issues concerning the conduct of the bank ’ s monetary policy, bearing in mind questions that are often raised. is monetary easing enough or not? we have heard the opinion that, with a view to overcoming deflation as early as possible, the bank ’ s policy stance is not enough. by contrast, there is another opinion arguing that financial conditions are already accommodative enough and asking if there is anything meaningful to be gained by further enhancement of monetary easing. at the press conference held after the monetary policy meeting at the end of october, i received questions based on both arguments. 2 as i have argued so far, in order to create a situation in which prices would rise, it is imperative to pursue powerful aggressive easing – that is, the first stage of the

gradually post higher growth, from 3. 3 percent in 2012 to 3. 6 percent in 2013, and further to 4. 1 percent in 2014. i fully recognize, however, that such projections regarding overseas economies rest on considerable uncertainties, including future developments in the european debt problem, the outcome of the problem surrounding the “ fiscal cliff ” in the united states, and the likelihood of economic deceleration in china being prolonged further. the bank will closely monitor these developments. ii. developments in japan ’ s economy next, i will outline the current situation of and the outlook for japan ’ s economy, taking into account the developments in overseas economies i have touched upon. as for recent developments, exports have shown a marked decline in the july – september quarter of 2012 following a rapid increase in april – june, and industrial production has decreased for two consecutive quarters, as overseas economies have moved deeper into the deceleration phase. looking at exports by destination, those to the european union ( eu ) have been declining for four consecutive quarters and those to china have recently shown a notable decline ( chart 4 ). the implications of the relations between japan and china have begun to affect japan ’ s economy, reflected in areas such as trade activities and tourism. whether the implications of japan ’ s relations with china will expand any further requires close attention. in contrast, domestic demand had been relatively firm on the whole until recently, mainly against the background of an increase in demand related to reconstruction following the great east japan earthquake. effects of the weakness in exports have gradually appeared in the employment situation, however, as seen in the fact that the number of new job offers in the manufacturing sector has been negative on a year - on - year basis since june. private consumption has also lost some of its momentum compared with the period leading up to early summer, partly due to the ending of subsidies for the purchase of environmentally friendly cars. as for business fixed investment, firms ’ investment plans for fiscal 2012 in the september tankan ( short - term economic survey of enterprises in japan ) have posted relatively high growth for that time of year. nevertheless, attention needs to be paid to whether firms might abandon their business fixed investment plans. taking this situation into account, the bank has continued to revise downward its assessment of japan ’ s economy as a whole, and assessed at the monetary policy meeting on october 30 that the economy has been “ weakening somewhat. ” bis central bankers ’ speeches going forward, developments in japan ’ s economy will basically