and supply. in these areas, there seems to be ample room for tapping potential demand in the domestic market. japan is the country in the world where the problem of aging and population decline is the most acute, but other countries in asia will face the same challenges in the not - so - distant future ( chart 16 ). looking back, the rapid development of energy - efficient technology in japan was triggered by major challenges, namely serious pollution and the rise in oil prices. the population aging japan is now experiencing also represents a major challenge. at the same time, however, if japan applies its technological capabilities, as epitomized by its robots, as well as its soft power, this challenge can give rise to new business models such as in the provision of personalized nursing care services and therefore also presents great business opportunities for japanese firms. v. the bank of japan ’ s policy response finally, i would like to briefly explain the policy responses the bank of japan has implemented in order for japan ’ s economy to overcome deflation and return to a sustainable growth path with price stability. to start with, the bank is pursuing powerful monetary easing, so - called “ comprehensive monetary easing. ” the overnight call rate is virtually zero percent, the lowest in the world, and the bank has committed itself to continuing the virtually zero interest rate policy until it judges, on the basis of the “ understanding of medium - to long - term price stability, ” that price stability is in sight. moreover, although extraordinary for a central bank, the bank last autumn started purchasing risk assets such as exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ). in addition, to strengthen the growth potential, the bank has also introduced a new program. through this program, it provides long - term funds with jgbs and other assets as collateral at a low interest rate, to support financial institutions ’ own initiatives in lending and investing in new growth areas. the bank strongly hopes that the program, by acting as a “ catalyst, ” will prompt vigorous efforts by financial institutions and firms. in many respects, japan has been the first among major economies to experience challenges such as balance sheet adjustments, a financial system crisis or rapid population aging. on the monetary policy front, many central banks in advanced countries have now adopted policy measures such as a zero - interest rate policy, quantitative easing, or credit easing. however, at the time, the bank of japan, the “ forerunner ” in

innovation ( innovation no sahou, 2007, available only in japanese ), argue that manufacturing today should not be a mere monozukuri that can be measured in terms of quantity, but kotozukuri, or event making, that is, the creation of products that tell a certain story with which purchasers can identify and in which they find value. bis central bankers ’ speeches foundations. for example, because japan ’ s domestic market is relatively large, firms have been able to make some profit, even if their business focuses only on the domestic market. with regard to the fiscal problem, long - term interest rates have not been rising, the yen has not depreciated, and there has been no capital flight. in fact, even though the recession following the failure of lehman brothers was more severe in japan than in the united states and europe, in the foreign exchange markets, demand for the yen has actually increased, as it is viewed as a safe - haven currency. this is attributable to the fact that japan has been running a large current account surplus and is the biggest creditor nation in the world, so that japan is perceived as among the most robust countries in the world in terms of foreign currency funding. be that as it may, given that the decline in the growth rate is a problem that has plagued japan for a long period, a tremendous amount of human energy is needed to reverse this trend. what concerns me in this regard is that japanese society is losing a healthy sense of optimism. just as excessive optimism can generate an asset bubble, excessive pessimism can depress the economy. what is necessary is a strong will for reform and overcoming excessive pessimism. we should keep in mind that japan ’ s economy and society still have many strengths. the first strength is that japan is in asia, which is the very center of global growth. for example, looking at trade developments with china, which is now japan ’ s largest trading partner, japan ’ s exports to china have grown 4. 7 - fold since 2000, while imports from china have grown 2. 7 - fold. moreover, japan ’ s direct investment position in china has expanded by a factor of more than 5 ( chart 14 ). meanwhile, the number of visitors to japan from asian countries has doubled in the past 10 years, to about 7 million, accounting for nearly 80 percent of all visitors. in the future, visitors from asia are likely to increase further as their living standards