s purchases of japanese government bonds ( jgbs ), which i will describe later. c. japan ’ s economy looking at developments in japan ’ s economy, indicators had been relatively weak for the apriljune quarter through the july - september quarter, particularly on the industrial production side, and real gdp had declined for two consecutive quarters ( chart 6 ). given this situation, there are views, mainly among overseas media, that japan ’ s economy has technically entered a recessionary phase due to the slowdown in emerging and commodity - exporting economies, particularly china. that being said, on the back of an increase in receipts of income from overseas business reflecting the yen ’ s depreciation, as well as an improvement in the terms of trade due to the declines in energy and commodity prices, firms have seen record profits, which consequently is reflected in gross national income ( gni ) and gross domestic income ( gdi ) having been on clear increasing trends compared to gdp. the mechanism of aggregate income formation has been relatively robust and business sentiment at a high level ( chart 7 ). thus, it seems that the economy has been resilient recently to exogenous shocks to a certain extent, such as the slowdown in overseas economies. in fact, despite relatively weak indicators of exports and industrial production, domestic demand has maintained its resilience, mainly in private consumption, and a virtuous cycle from income to spending has continued to operate on the whole. final demand also remained firm in the july - september quarter. this is contrary to what the economy experienced from 2007 until the global financial crisis occurred in 2008, when japan ’ s economy actually entered a recessionary phase triggered by the slowdown in overseas economies as the terms of trade deteriorated because of the surge in energy and commodity prices. let me add a few things about exports and industrial production. real exports have been picking up slightly recently, albeit with a rising concern over the slowdown in the chinese economy ( chart 8 ). this is suggested by the divergence between the volume of exports in trade statistics and figures for real exports, which might be attributable to a rise in exports of goods with relatively high value - added – such as electronic parts and devices – observed after the july - september quarter, reflecting the product life - cycle of mobile phones. moreover, strength in imports is also a reflection of firmness in domestic demand. meanwhile, although bis central bankers ’ speeches the july - september quarter represented the second consecutive

pierre duguay : the bank of canada ’ s perspective on the penny remarks by mr pierre duguay, deputy governor of the bank of canada, to the senate committee on national finance, ottawa, ontario, 26 may 2010. * * * good evening mr. chairman, honourable senators. i ’ m pleased to have the opportunity to appear before you tonight to provide the bank of canada ’ s perspective on the penny. first, let me take a moment to explain the bank ’ s role regarding canada ’ s currency. we are responsible for supplying canadians with bank notes that they can use with confidence. at year - end 2009, there were 1. 8 billion bank notes in circulation, with a total value of $ 55. 5 billion – approximately $ 1, 630 per canadian. the bank of canada is not responsible for coins. decisions on coinage rest with the federal government, in particular, the department of finance, and with the royal canadian mint. however, coins are an essential adjunct of bank notes to complete cash transactions. so, the bank does have an interest in coins, and we welcome your review of the case for keeping or eliminating the penny. i would like to remind you that cash remains very important to canadians, despite the popularity of alternative payment options. surveys by the bank of canada have found that almost three - quarters of canadians pay with cash at least once a week, compared with 64 per cent for debit cards and 36 per cent for credit cards. 1 these surveys show that cash is the preferred method of payment for purchases under $ 25. ( debit cards are preferred for purchases in the $ 25 to $ 100 range, and credit cards are preferred for purchases greater than $ 100. ) the bank ’ s interest in coins can also be viewed in the context of our responsibility for monetary policy, which is anchored in our commitment to achieve our 2 per cent target for inflation. experience has shown that the best way for monetary policy to contribute to economic performance is by keeping inflation low, stable, and predictable. therefore, the bank views the possible elimination of the penny in terms of the potential impact on inflation, and has conducted some preliminary research on this issue. the findings, which have been made available to other researchers, show that any impact on inflation would be insignificant and more likely non - existent. a common concern is that retailers, who often post prices ending in 9 cents, may round prices up to an even number, absent the penny, and that this would be inflationary