joachim nagel : germany - generally healthy, but facing challenges keynote speech by dr joachim nagel, president of the deutsche bundesbank, at the capital city reception, berlin, 17 october 2023. * * * check against delivery. 1 germany : the " sick man " of europe? ladies and gentlemen, the bundesbank's capital city reception is an event where you would normally expect to spend a carefree evening and hear the bundesbank president tell you something about inflation and monetary policy. that is as this evening should be. however, looking at the situation in the middle east, i find it difficult to start with " business as usual ". ten days ago, terrorists killed hundreds of people in israel with the utmost brutality. more than 260 visitors died in the re'im music festival massacre alone. there's hardly anyone in israel who isn't mourning the death of friends or relatives, hoping that injured people will recover, anxiously awaiting the fate of loved ones taken hostage. i join them in their mourning, hopes and anxiousness. and i wish to pledge my solidarity here and now with the people of israel. for ten days now, the world has been a different one. violence has reached a new level. my thoughts are with all those who are suffering through no fault of their own from the outbreak of violence. ladies and gentlemen, almost exactly a year ago, at the bundesbank's last capital city reception, the inflation rate stood at more than 10 %. since then, inflation has fallen back significantly, thanks in part to the eurosystem's forceful response. the monetary policy measures are yielding results. however, inflation remains high. along with uncertainty. on the governing council of the ecb, we discuss and assess developments in economic activity and the inflation outlook. the decisions we take there are data - dependent. but that's all i wish to say about the current monetary policy stance. you see, today's topic is a different one : germany's prospects as a business location. anyone who has been following the news in recent months won't have missed the stories about the return of germany as the " sick man ". if things did not change soon, they said, germany faced the risk of " deindustrialisation ". this discussion mainly gained traction on the back of the weak growth figures since the last quarter of 2022. forecasts by all manner of institutions suggest that germany is the only major industrialised

by the fall of the berlin wall in 1989 – the surge in the number of economies participating in the global market economy and the resulting intensification of global competition. furthermore, the rapid expansion of the market economy, together with the progress in it and the ample inflow of capital to emerging economies, led to a rapid catch - up in industrialization among emerging economies and an increase in their domestic demand. bis central bankers ’ speeches while these rapid global economic changes were occurring, japan needed to devote substantial economic resources to dealing with the post - bubble adjustments. as a result, japan was, in some respects, slow in adapting to these changes by, for example, achieving structural reforms and capturing demand from emerging economies, both of which bring about forward - looking investment. following the collapse of the bubble economy, it seemed for a time that some firms had been successful in riding out the strength of the yen in 1995 and in ambitiously undertaking wide - ranging management reforms and restructuring to develop global business strategies. however, the changes in the global economy have been progressing even faster than such efforts, and for many firms the fruits of such endeavors have been limited. in view of the situation i have described, i will now talk about three issues that japan faces. a. the low birth rate and population aging in 2005, japan ’ s population for the first time in the postwar period registered a decline. the working - age population – that is, the population aged between 15 and 64 years old – in fact had already peaked in 1995 at 87 million and has been declining since then, due to the low birth rate and population aging. in the 15 years to 2010, the working - age population declined by 5. 88 million. during the same period, the total population increased by about 1. 61 million, with the population aging further. according to population projections made by the national institute of population and social security research in 2006, the decline in the working - age population will continue to outpace that in the total population until the middle of the 21st century, and in 2055 the working - age population will have almost halved from the current level to 45. 95 million in the medium variant projection. unless the labor force participation rate and / or labor productivity increase, these trends will lower economic growth and exert downward pressure on the growth potential. the decline in the working - age population restrains economic growth not only from the supply side but also from the demand side, by reducing the number of consumers earning wages