, totaling around 75 trillion yen, are being implemented. the federal reserve has also introduced various aggressive monetary easing measures, including reductions in its policy interest rate. although the situation remains fragile given the continued declines in the prices of residential and commercial properties, it is hoped that the adverse feedback loop will gradually be mitigated with the help of these policy actions. let me point out another issue regarding the relationship between financial and economic activity. what i have discussed so far is declining financial and economic activity in the phase of an economic downturn. in the phase of an economic expansion, the opposite phenomenon may occur. for example, if capital increases due to an accumulation of profits reflecting an economic expansion, the risk - taking capability of financial institutions will increase. and if this induces financial institutions to adopt aggressive lending attitudes, economic conditions will be boosted further. thus, changes in the capital of financial institutions are a factor amplifying business cycles both upward and downward through changes in their lending attitudes. given the experience of both the current sharp economic downturn and the overheating of the world economy that preceded it, a wide range of issues, including the degree to which financial institutions should be regulated, are being hotly debated internationally to moderate the amplification of business cycles. iii. the bank's conduct of monetary policy i have so far explained the situation of japan's economy and its prospects with some reference to economic developments overseas. i will turn now to the subject of recent policy conduct by the bank, some aspects of which i have already mentioned. since last autumn, the bank has taken a number of measures in view of the substantial deterioration in economic conditions and tight financial conditions. i will refer here only to the most important ones. first, there have been policy interest rate reductions. the bank has reduced its target for the policy interest rate – the uncollateralized overnight call rate – from 0. 5 percent to 0. 1 percent. reduction of the policy interest rate is the most conventional policy action taken by central banks to increase demand in the economy. usually, when central banks alter their policy interest rates, it is assumed that this will influence longer - term interest rates in financial markets and firms'funding rates. if, however, financial markets are unstable or financial institutions and investors become excessively cautious in taking risks, financial intermediation will not function properly, and the effects of the reduction in the policy interest rate will not spread to the whole economy as intended. the turmoil in

haruhiko kuroda : japan ’ s economy and monetary policy speech by mr haruhiko kuroda, governor of the bank of japan, at a meeting with business leaders, osaka, 28 september 2015. * * * introduction it is my great pleasure to have the opportunity today to exchange views with a distinguished gathering of business leaders in kansai. i would like to take this opportunity to express my sincerest gratitude for your cooperation with the bank of japan ’ s branches in osaka, kobe, and kyoto. looking at the recent economic developments, the slowdown in emerging economies, particularly china, has led to the sluggishness in japan ’ s exports and production. financial markets globally were volatile against the background of the decline in chinese stock prices. meanwhile, on the price front, the year - on - year rate of increase in the consumer price index ( cpi, all items less fresh food ) is about 0 percent, due mainly to the effects of the substantial decline in crude oil prices from 2014. thus, somewhat stagnant developments have been noticeable since summer, but as i will explain, the fundamentals of japan ’ s economy are sound and the underlying trend in inflation has been improving steadily. quantitative and qualitative monetary easing ( qqe ), which the bank introduced in april 2013, has been exerting its intended effects toward overcoming deflation. today, before exchanging views with you, i would like to explain the bank ’ s view on the current situation of and outlook for economic activity and prices, as well as its monetary policy. i. economic activity in japan and abroad current situation of and outlook for japan ’ s economy let me start by discussing the current situation of and outlook for japan ’ s economic activity. japan ’ s economy has continued to recover moderately with a virtuous cycle from income to spending operating in both the corporate and household sectors, although exports and production are affected by the slowdown in emerging economies. that is, in the corporate sector, profits have marked a record high and firms ’ fixed investment stance has been positive. in the household sector, wages have been growing – as seen in the rise in base pay for two consecutive years in a situation where the unemployment rate has declined to the level that can be regarded as almost corresponding to “ full employment ” – and private consumption has been resilient. the real gdp growth rate for the april - june quarter of 2015 was minus 0. 3 percent on a quarter - on - quarter