and a tightening of labor market conditions. we must recall that behind the aggressive risk - taking in the latter half of the 1980s there was the market perception of long - sustained low interest rates for the future under price stability. it may be useful to carry out an exercise to demonstrate the consequences of long - sustained low interest rates and the financial imbalance on the future development of economic activity and prices. this may further clarify the role and merits of the two perspectives in our new policy framework. references [ 1 ] alchian, a., and b. klein, " on a correct measure of inflation, " journal of money, credit and banking, february 1973, pp. 173 - 191. [ 2 ] bernanke, b., and m. gertler, " monetary policy and asset price volatility, " economic review, federal reserve bank of kansas city, fourth quarter, 1999. [ 3 ] eiglsperger, m., " the treatment of owner - occupied housing in the harmonized index of consumer prices, " ifc bulletin, no. 24, august 2006, pp. 68 - 79. [ 4 ] fisher, i., " nature of capital and income, " new york, 1906. [ 5 ] giavazzi, f., and f. mishkin, " an evaluation of swedish monetary policy between 1995 and 2005, " report published by the riksdag ( swedish parliament ) committee on finance, 2006. [ 6 ] girouard, n., m. kennedy, p. noord and c. andre, " recent house price developments : the role of fundamentals, " economics department working papers no. 475, oecd, 2006. [ 7 ] hayek, f. a., " full employment at any price? " the institute of economic affairs, 1975. [ 8 ] iwata, k., " budgetary balance, aging, and external balance : the future of the united states - japan external imbalance, " journal of the japanese and international economies, vol. 5, 1991, pp. 473 - 497. [ 9 ] iwata, k, " stock economy and the tax system, " ( ed. ) yukio noguchi, economic analysis of stock economy, nihon keizai shimbunsha, 1992 ( in japanese ). [ 10 ] iwata, k., " the role of money and monetary policy in japan,

may 10, 2017 bank of japan outlook for economic activity and prices and monetary policy speech at a meeting held by the naigai josei chosa kai ( research institute of japan ) in tokyo haruhiko kuroda governor of the bank of japan ( english translation based on the japanese original ) introduction it is my great honor to have the opportunity to address you today at the naigai josei chosa kai. at the monetary policy meeting ( mpm ) held at the end of april, the bank formulated its projections for japan's economic activity and prices as well as risk factors through fiscal 2019, and released them in the outlook for economic activity and prices ( outlook report ). today, i would like to talk about the bank's outlook for japan's economic activity and prices as well as its thinking behind the conduct of monetary policy, while outlining the outlook report. i. current situation of japan's economic activity and its outlook stronger global economic growth momentum let me start by talking about global economic developments. in the first half of 2016, pessimistic views about the global economy prevailed amid turbulence in global financial markets against the background of the slowdown in emerging economies and uncertainties regarding those economies. with the benefit of hindsight, however, it appears that the global economy hit bottom in the first half of 2016. since mid - 2016, the global economy has continued to improve steadily, and its growth momentum now seems to be strengthening further. in particular, a global improvement in the manufacturing sector and trade activity has become clear. for example, an indicator of the overall business conditions in the manufacturing sector has continued on an improving trend in advanced economies as well as emerging and commodity - exporting economies ( chart 1 ). in addition, with regard to the world trade volume - - calculated by adding up imports in each country - - a pick - up in the trade volumes has been spreading globally, mainly for asia and the united states ( chart 2 ). the world trade volume had tended to grow at a slower pace than world economic growth for a long period since the global financial crisis, and such deceleration in growth of the world trade volume is called " slow trade. " as regards the background to this, structural factors such as a pause in the expansion of the global supply chain have been pointed out, in addition to a cyclical decline in demand. the recent global improvement in the manufacturing sector and trade activity draws attention as this may suggest a change is finally