22 ). if there is progress with a shift in the deflationary mindset of holding money to a growth - percentage of firms in deficit is that among firms with capital of less than 100 million yen in the sampling survey on firms for fiscal 2021 conducted by the national tax agency. oriented mindset of using money effectively, this will lead households to reallocate some of their savings into investment in financial assets focusing on the long term, on regular contributions, and on risk diversification. this will boost households'earning power through the acquisition of dividend income from many listed firms that they have invested in, and at the same time promote future asset formation through the growth of firms that they have invested in. simply keeping cash and deposits drives households far away from the benefits of growth in japan's economy, which has been achieved through the business activities of many firms. developments in the tokyo stock price index ( topix ) and dividend yields from 2001 onward show that asset values have risen in tandem with the growth of listed firms even after significant shocks such as the gfc, and dividend yields have remained at around 2 percent since that crisis ( chart 23 ). the economy continues to grow through activities of a large number of firms. during the showa era, from 1926 through 1989, japan's economy realized growth driven by exports, and industrial clusters were formed, bringing about a society in which almost all japanese people considered themselves to be middle - class based on income earned from the firms where they work, a concept widely shared during the 1970s when japan's population exceeded 100 million. as a result of firms'earning power weakening accompanied by the yen's appreciation following the 1985 plaza accord, as well as a population decline, and also of sluggish wages, it is now necessary for households to change the structure for boosting their earning power. it is important that households invest in equity and investment trusts as a means of linking to multiple listed firms, transforming the structure for strengthening their earning power to one that promotes not only sustainable and stable increases in wages and financial income accompanying nominal gdp growth but also asset formation. thank you. economic activity, prices, and monetary policy in japan speech at a meeting with local leaders in gifu august 31, 2023 nakamura toyoaki member of the policy board bank of japan chart 1 imf projections in the world economic outlook update ( july 2023 ) y / y % chg. imf projections - 2 - 4 japan united states -

deflation. however, with setbacks such as the global financial crisis see international monetary fund ( imf ), " regional economic outlook for asia and pacific, " october 2022. ( gfc ) and the covid - 19 pandemic, the deflationary mindset has not yet been dispelled. considering that the principle of monetary policy is to achieve price stability, thereby contributing to the sound development of the national economy, it is important for a virtuous cycle to take shape in which wages increase on the back of stable price rises, economic activities such as investment and consumption become aggressive, and interest rates rise accordingly. for this to happen, the country's economic and wage structures need to change so that wages increase alongside economic growth, as is the case in the united states and europe. monetary policies in these economies aim to curb demand and subdue high inflation, in the context of their present economic and wage structures. in the case of japan, however, the structures of sluggish economic activity and wages need to be changed, and the price stability target seems to serve as a barometer for gauging the progress of this change. the year - on - year rate of increase in the cpi for all items less fresh food has exceeded 2 percent for 16 consecutive months, and labor shortages have also exerted greater pressure on firms to raise wages. nevertheless, developments in the gdp deflator - - which measures the change in prices of value - added generated in the domestic economy - - show that, unlike in the united states and europe, a substantial increase in unit labor costs has not been observed in japan ( chart 6 ). thus, the current inflation in the country seems to be due mainly to the effects of the pass - through to consumer prices of cost increases led by the surge in import prices with a lag, and inflation accompanied by wage increases has not yet been achieved. the second reason i believe the bank needs to continue with monetary easing concerns boosting the earning power of firms, including small and medium - sized ones, which allows for wage growth that can keep up with inflation. the june 2023 tankan ( short - term economic survey of enterprises in japan ) shows that the diffusion index ( di ) for output prices has been positive for nine consecutive quarters, and that the gap with the input prices di has been narrowing since its peak in the january - march quarter of 2022. 4 this points to firms'ongoing efforts to pass on higher