improvement in overseas economic conditions mentioned earlier. the real gdp growth rate for the april - june quarter of 2010 in the second preliminary estimate was 1. 5 percent on an annualized quarter - on - quarter basis, showing a clear deceleration in growth compared to the previous two quarters. however, exports have been increasing ; private consumption has been picking up, due to the government ’ s economic stimulus measures favoring energy - efficient products ; and business fixed investment is showing signs of picking up, led by the increase in exports. yet, the main economic indicators confirm that the level of economic activity remains lower than its recent peak. in this situation, there has been a persistent sense of excesses in capital stock and the workforce, and thus firms remain cautious about spending despite a notable improvement in corporate profits. therefore, prospects for a self - sustaining recovery in domestic private demand remain uncertain. in terms of outlook, the economy is likely to recover at a moderate pace on the whole, with exports continuing to increase. however, the pace of increase in exports is likely to remain moderate for the time being, mainly due to the following : ( 1 ) the waning effects of inventory restocking in overseas economies ; ( 2 ) the slowdown in the high growth of emerging economies, primarily reflecting tighter economic policies ; and ( 3 ) the yen ’ s recent appreciating trend. a decline in private consumption seems inevitable in reaction to the waning effects of the government ’ s economic stimulus measures favoring energy - efficient products. thus, the pace of recovery in japan ’ s economic activity is likely to slow temporarily. nevertheless, it is anticipated that japan ’ s gdp growth rate for fiscal 2010 will exceed the potential economic growth rate. for reference, the median of the policy board members ’ forecasts in july for real gdp was 2. 6 percent for fiscal 2010, and 1. 9 percent for fiscal 2011. 2 b. prices : weaker downward pressure from the negative output gap although prices continue to decline due to the substantial slack in the economy as a whole, the pace of decline is slowing as a trend due to the gradual improvement in the aggregate supply and demand balance. excluding the effects of the special subsidies for high school tuition introduced in april 2010, the year - on - year pace of decline in the consumer price index excluding fresh food, or the core consumer price index ( cpi ), is gradually slowing. the median of the policy board members ’ forecasts in july for the core cpi was at

s phillips curve, where the underlying theory is that inflation dynamics can be explained in the context of slackening in the labor market. i know that economists continue debating hotly whether or not a meaningful slope in the phillips curve is observed in major economies in recent years. 3 as a matter of fact, this simple graph appears to suggest that the phillips curves for the united states and the euro area have barely sloped, if at all, since the middle of the 1990s. one important aspect is that both flat “ curves ” are located at around 2 percent inflation. in other words, the inflation rate has been mostly stable around 2 percent, irrespective of noticeable ups and downs in unemployment : inflation has been well anchored at the level intended by the respective central banks. of course, the recent sizable and persistent deviation from 2 percent for the euro area could be problematic. i understand this is exactly the reason why the european central bank joined the qe club recently. james tobin, “ inflation and unemployment, ” american economic review, vol. 62, 1972. the ranking does not alter even if we use headline inflation instead of core. see, for instance, robert j. gordon, “ the phillips curve is alive and well : inflation and the nairu during the slow recovery, ” nber working paper, no. 19390, 2013. bis central bankers ’ speeches compared with these two phillips curves, japan ’ s is unique in two points. first, the negative correlation between unemployment and inflation is more apparent in japan. second and more importantly, the curve crosses the zero inflation line with a larger part of it remaining in negative territory. this suggests that long - term inflation expectation in japan has likely been around zero or even slightly negative for nearly two decades since the mid - 1990s. this is exactly the problem which the bank decided to address decisively a little over two years ago through quantitative and qualitative monetary easing ( qqe ). our intention was twofold : first, to stimulate the economy throughout various transmission channels and thereby move the economy and inflation in the northwest direction along our moderately but still meaningfully sloped phillips curve ; and second, to create higher inflation expectations and thereby shift the entire phillips curve upward, through the drastic shift in our monetary policy. things are moving in line with our original intention. the latest data point can be interpreted as confirming that underlying inflation in japan has been improving significantly, although the firmness is currently masked by the temporary negative impact of the sharp decline