in the u. s. dollar is apparently easing concerns over the future prospects of exports and production. in addition, a sense of relief is apparently growing in the markets because the shanghai g - 20 has alleviated concerns that the kind of abrupt change in the exchange rate system that was made in the summer of 2015 may occur again. still, as the problem of excess production capacity in the manufacturing sector lurks in the background, the low growth in fixed asset investment and inventory adjustments are expected to continue for a while. as for prices, the disinflationary trend is likely to continue for a while, as the supply - demand conditions remain easy, mainly with respect to goods. as for overseas economies, as i have explained until now, the slowdown in emerging economies, including china, and commodity - exporting economies is coming to a halt. however, as the recovery of the u. s. economy, which is the driving force, lacks strong momentum, the world economy is expected to remain in a state of slight deceleration for the time being. while the negative spiral of the strong dollar - - and the strong chinese yuan - - and the weak crude oil prices is in a lull in the global financial markets, market liquidity has apparently been reduced due to various financial regulations. in addition, the influence of algorithmic trading and high - frequency trading ( hft ) is apparently growing, so the possibility cannot be ruled out that the markets will become unstable again because of the effects of the u. s. economic developments and ensuing monetary policy conduct. therefore, i continue to pay attention to the possibility that these factors will affect such aspects as market confidence. b. japan ’ s economy japan ’ s economy grew by 1. 7 percent in the january - march quarter this year on an annualized quarter - on - quarter basis, after posting negative growth of 1. 1 percent in the octoberdecember quarter last year ; however, if the leap - year factor is excluded, the latest growth was close to zero. recently, private consumption has continued to be lackluster after weatherrelated factors that affected consumption in the winter have dissipated. in addition, production activity, which has recently been more or less flat or weaker due to the effects of the slowdown in emerging economies, including china, and commodity - exporting economies and of an accident at a steel plant, is showing some weakness, mainly in the transportation equipment sector, whose supply chains have been disrupted by the

bank of japan presents its quarterly economic outlook for summer 1997 bank of japan, quarterly bulletin, august 1997 ( advance summary ). 1. japan ’ s economy continues on a moderate recovery trend. production and income are showing underlying firmness despite the continued reaction to the temporary surge in demand ahead of the consumption tax hike. among final demand items, public - sector investment has been on a decreasing trend, and housing investment has been somewhat lackluster, particularly as a result of the reaction to the rise in demand ahead of the consumption tax hike. on the other hand, net exports have recently increased significantly and business fixed investment has been rising steadily. despite the continued decline in demand which followed the rise ahead of the consumption tax hike, particularly in consumer durables, the recovery trend in personal consumption does not seem to have been hindered. in these circumstances, industrial production has been firm and the growth in employees ’ income has been rising steadily, albeit moderately. price indices were pushed up in april 1997 by the consumption tax hike, but excluding this factor, prices have been stable. both quarter - to - quarter and year - to - year changes in domestic wholesale prices ( adjusted for seasonal electricity rates ) have been near zero, and the year - to - year declines in corporate service prices have narrowed. the year - to - year rises in consumer prices ( nationwide, excluding perishables ) are widening somewhat, albeit by a small margin. changes in commercial land prices have varied by type, and residential land prices have virtually stopped declining. 2. in the financial markets, the overnight call rate ( uncollateralized ) stayed slightly below the official discount rate of 0. 5 per cent. the long - term government bond yield rebounded to near 2. 7 per cent in late may, as market uncertainties about the economic outlook and the japanese financial system gradually subsided after the second half of april. however, it declined to around 2. 2 - 2. 3 per cent. stock prices rose to ¥20, 000 - 21, 000 in may and june 1997, and have recently been fluctuating without showing clear direction. in the foreign exchange market, the yen reached ¥127 to the u. s. dollar in early may, but later appreciated and has recently moved at around ¥113 - 116 to the u. s. dollar. with respect to the fund - raising activities by firms, growth in bank lending continues to be lackluster but fund - raising through the capital market has