2. in the right ‐ hand chart, figures are those for real imports. the figure for 2020 / q3 is that for july. sources : imf ; cpb netherlands bureau for economic policy analysis, etc. chart 2 gdp and real exports real gdp real exports contribution ratio, s. a., ann., q / q % chg. s. a., 2013 / q1 = 100 real exports - 5 - 10 - 15 private demand - 20 public demand - 25 net exports real gdp - 30 - 35 cy2011 19 20 note : in the right ‐ hand chart, figures are based on staff calculations. sources : ministry of finance ; bank of japan. cy201 3 chart 3 private consumption contribution ratio, s. a., y / y % chg. ‐ 5 ‐ 10 durable goods < 9. 4 > nondurable goods < 39. 1 > services < 51. 5 > ‐ 15 consumption activity index ‐ 20 cy 2 0 0 7 0 8 note : figures in angle brackets show the share in the consumption activity index. nondurable goods include goods classified as " semi ‐ durable goods " in the sna. sources : cabinet office ; ministry of economy, trade and industry ; ministry of internal affairs and communications ; bank of japan, etc. chart 4 business fixed investment developments in business fixed investment plans vintage ( equipment age ) years cy 1992 notes : 1. in the left ‐ hand chart, figures are based on the tankan. all industries, including financial institutions. including software and research and development ( r & d ) investment and excluding land purchasing expenses ( r & d investment is excluded through the december 2016 survey ). 2. in the right ‐ hand chart, figures are for all enterprises. fixed assets excluding land ( including construction in progress ). current year vintage = { ( prior year vintage + 0. 25 year ) x ( prior year ‐ end balance – current year retired ) + 0. 25 year x new construction } / current year ‐ end assets. based on the " national wealth survey, " the vintage at the end of 1970 was set at 8. 2 years. sources : ministry of finance ; bank of japan. chart 5 corporate financing and labor market conditions number of corporate bankruptcies labor market conditions cases per month 1, 800 2. 0 s. a., ratio s. a., % number of corporate bankruptcies 1, 600 1, 400 1. 5 1, 200 1, 000 1. 0

the economy recover steadily and the output gap return to positive territory. even if the inflation rate turns positive again at an early stage, however, it is unlikely to accelerate further for a while. looking back at the situation prior to the spread of covid - 19, the inflation rate did not accelerate despite the economy being close to full employment and continuing to register a positive output gap. this phenomenon is not unique to japan as inflation rates in most major advanced economies have been slowing, albeit to varying degrees ( chart 8 ). i think that the question of why inflation has not been accelerating needs to be seriously revisited. it is often pointed out that the reason for japan's sluggish inflation rate is an entrenched deflationary mindset among consumers that is born out of their past experiences with deflation, making it difficult for firms to fully pass on upward pressure on wages to sales prices. in addition, structural changes that began in the years prior to the outbreak of covid19 have made the inflation mechanism more complex. specifically, these changes include the establishment of global supply chains, which resulted in low and stable goods prices worldwide, ( 2 ) the shift to a service economy in japan in response to globalization, ( 3 ) the resulting increased sensitivity of prices to service sector wages, ( 4 ) the increase in laborsaving investment as well as improvements in labor productivity by firms to address labor shortages, and ( 5 ) the tendency of firms to absorb the upward pressure on wages by improving productivity rather than passing it on to sales prices. similar structural changes can also be observed in other major advanced economies, and, while they have boosted job opportunities, they also appear to have acted to curb increases in wages and prices on the whole. given the possibility that these structural changes will regain momentum once covid - 19 subsides, it is difficult at this point to clearly judge whether inflation will accelerate immediately even if it turns positive again. however, as i mentioned earlier, it goes without saying that, even if actual inflation is sluggish, keeping inflation expectations somewhat positive is important from the perspective of ensuring that spending behavior in the private sector is forwardlooking. i believe that the impact of these structural changes on prices will need to be examined in more detail. i will return to the structural changes in japan and changes in the inflation mechanism later. iii. monetary policy a. current monetary easing policy and its basic framework next, i will touch upon the bank's conduct of monetary policy