was effective in an era of steady growth in supply and demand through exports and domestic industrial clusters, with growth being driven through process innovation, exemplified by kaizen ( continuous improvement ). now, however, in the so - called vuca era, 3 which is characterized by the creation of high value through intangible assets and growth that requires risk taking, it is not easy for individual firms to sustain growth by going it alone. if firms become fixated on maintaining all of their business lines, they will be slow to realign their business portfolios and will end up losing focus. as excessive costs build up and profits decline in such firms, growth in employee wages will end up being constrained, which will in turn increase concerns regarding the future. it should be noted that, from fiscal 2022, japan's baby boomer generation will begin moving into the category of advanced elderly. greater labor force participation by women and seniors contributed to economic growth over the past decade. however, as further increase in the labor force participation rate proves difficult, the more pressing need will be to improve productivity ( chart 12 ). on the one hand, boosting productivity will require business owners to emphasize the growth of both the business and its human capital ; they will need to consolidate less productive businesses under their best owners ( companies that are expected to maximize the value of the business over the medium to long term ) ; and they will have to channel resources into growth businesses such as through m & a activities. on the other hand, i think it is critical for both firms and households to be forward - looking in their actions to achieve growth and affluence, with, for example, individuals continually pursuing selfbetterment to gain knowledge and skills that lead to greater added value. vuca, an acronym which stands for volatility, uncertainty, complexity, and ambiguity, refers to a situation in which large - scale changes make it difficult to predict the future. from this perspective, it is also vital to develop both a social safety net and a sustainable social security system that encourage active risk taking. for example, corporate pensions are a key factor in enabling working people of child - rearing age to change jobs without adding to their anxiety about post - retirement years. to encourage the broader adoption of corporate pension plans among smes, the japanese government introduced in 2018 a simplified defined - contribution pension plan, and ideco + ( ideco plus ), a defined - contribution plan for small and medium - sized

leverage accumulated over the years and the lack of transparency on reporting accounts. the lack of confidence extended to the entire financial system, and its capacity to appropriately assess the proper value of assets and liabilities. the attempt to reduce risk and leverage resulted in an excess of supply that led to a sharp reduction of asset prices. some investors tried to move to other markets, such as primary commodities, creating a bubble which, over the summer, brought oil prices to over usd 140 per barrel. an inflationary shock was thereby superimposed on the financial crisis, further weakening the confidence of households and companies. the failure of lehman brothers delivered the final blow, with a general contagion to all markets. the fall of confidence has had a direct impact on agents ’ behaviour. consumption and investments have fallen. portfolio investments are shifted away from any risk, and towards liquid assets. banks do not lend to each other and the interbank market, which is at the basis of all markets, does not function properly. there is a tendency to reduce bank lending to the real economy. in such a context, agents tend to be less reactive to incentives and opportunities. for instance, the large fall in fuel prices and other primary commodities since the summer is leading to lower inflation and improving wage purchasing power ; indeed, euro area wages are still growing faster than inflation. nevertheless, the propensity to save has increased and consumption has therefore stagnated. the depreciation of the euro and the improvement in competitiveness should induce firms to invest, especially in the export sector, but, instead, trade is suffering. the effectiveness of economic policies is impaired. central banks in advanced economies have drastically reduced policy rates, but bank borrowing rates for final users – households and companies – have come down only marginally. in the united states, where policy rates are lower than 1 %, rates for mortgages and companies are in most cases higher than in the euro area, where policy rates are at 3. 25 %. fiscal policies have also lost effectiveness. the us stimulus package last spring did not have the expected impact and has not prevented the cyclical deterioration. there is a risk that the policy action, even when rapid and ample, does not succeed in reversing the trend. there is a risk that policy - makers run out of ammunition too early and remain without a means of escape. as the great spaghetti westerns of our youth have taught us, the “ goodies ” win if they shoot first. but he also