i would like to give my view on interrelationships between the euro area and japan, focusing on capital flows. as i have mentioned, in the euro area, monetary union has triggered various kinds of structural change, bolstering the development of the overall economy. the impact is so large that it has affected not only the euro area itself, but also japan. an example of the effect is direct investment. direct investment from western europe to japan soared more than tenfold in a year, from about 100 billion yen in 1998 to over 1 trillion yen in 1999. investment from france was especially large, which reflects the capital collaboration that was seen in the automobile industry. direct investment from japan to the euro area is also on the rise. the increase in direct investment will promote the reallocation of management resources, technology transfer, and competition, resulting in boosting both economies. the increase in capital flows between the two economies is well evidenced in portfolio investment. in 1999, japan ’ s portfolio investment in the euro area exceeded that in the united states. japan ’ s foreign portfolio investment in france, germany, the netherlands, and luxembourg, the four euro area countries for which individual data are available, totaled almost 5. 6 trillion yen in 1999. on the other hand, japan ’ s portfolio investment in the united states was 1. 4 trillion yen. this is rather noteworthy, because, in international capital markets, the united states, with its huge current account deficit, absorbs a lot of funds provided by the euro area and japan. despite such a situation, capital flows between the euro area and japan are surging, and both economies are growing more interdependent in international capital markets. in the increasingly integrated global market, the euro area and japan are becoming more and more dependent. i hope today ’ s forum will contribute to bringing the two economies closer, and serve as an opportunity to enhance communication between the private sector of the euro area and that of japan. i know this forum will be a success.

rent - seeking and portfolio hedging activities. in addition, high and variable inflation impeded growth as it was difficult for economic agents to undertake proper long - term planning. in such an inflationary and consequently unpredictable environment, it was impossible to sustain low interest rates as savers demanded a premium on their resources. main elements of the current economic strategy to reverse the cycle of large fiscal deficits and unsustainable debt, the government embarked on a comprehensive economic transformation programme beginning at the end of 2009 and supported by the international monetary fund and other international development partners. the objective of the programme is to secure long - term macroeconomic stability, thus creating an environment that is conducive to the low interest rates and long - term investment that are critical requirements for sustainable economic growth. the main pillars of the transformation programme are : eliminating the fiscal deficit over a four - year period and institutionalising prudent fiscal practices which will translate into sustained reductions in the bis central bankers ’ speeches debt to gdp ratio ; enhancing financial system stability and creating an enabling business environment. in the main, the government has made a strong start to the programme, achieving most of the quantitative targets under the imf stand - by agreement. this, which includes the extraordinary success of the voluntary jamaica debt exchange ( jdx ) in february last year, contributed to a trend decline in market interest rates. from the time that a programme was agreed with imf staff in december 2009, bank of jamaica ’ s 30 - day signal rate has been reduced from 12. 50 per cent then to 6. 25 per cent now, a fall of 625 basis points. the rate on market - determined 180 - day treasury bills declined even more sharply by 1, 024 basis points from 16. 80 per cent in december 2009 to 6. 56 per cent at the most recent auction last month. interest rates in the private money market and on deposits and loans also fell. the result is a substantially reduced cost of capital which is needed to encourage increased longterm investment and growth. the decline in interest rates is also linked to the positive trends and outlook for inflation. annual inflation declined to 7. 8 per cent in august from 12. 6 per cent a year earlier and is expected to fall further during this fiscal year to settle within the target band of 6. 0 per cent to 8. 0 per cent. for the medium - term, inflation is targeted to continue its fall towards the average inflation rate of our major trading partners. against