september 27, 2021 bank of japan japan's economy and monetary policy speech at a meeting with business leaders in osaka ( via webcast ) kuroda haruhiko governor of the bank of japan ( english translation based on the japanese original ) introduction it is my great pleasure to have the opportunity today to exchange views with a distinguished gathering of business leaders in the kansai region. i would like to take this chance to express my sincerest gratitude for your cooperation with the activities of the bank of japan's branches in osaka, kobe, and kyoto. while it is most regrettable that i am unable to visit osaka for the second year in a row due to the continuing impact of the novel coronavirus ( covid - 19 ), i look forward to hearing your views online, which will be useful in the bank's policy decisions and business operations. in my speech today, i will talk about the bank's view on developments in economic activity and prices and then explain the thinking behind the recent conduct of monetary policy. i. developments in economic activity and prices economic developments let me start by talking about economic developments. japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of covid - 19 at home and abroad. looking back, in the april - june quarter of 2020, when the first state of emergency was declared, real gdp fell by about 10 percent compared with the level before the pandemic as a wide range of economic activities were negatively affected. however, the level of real gdp increased through the second half of the year. since the turn of this year, real gdp has remained more or less flat because private consumption has been pushed down by the impact of the repeated resurgence of covid - 19 and public health measures. the level of real gdp for the april - june quarter this year is still almost 3 percent below the pre - pandemic level ( chart 1 ). the rapid spread of the highly contagious delta variant during the summer inevitably has led to subdued face - to - face services, such as accommodations as well as eating and drinking, and private consumption overall has remained stagnant. although it is true that japan's economy has been held back by the successive waves of covid - 19, the mechanism for the economy to pick up has continued to work. this is mainly because a virtuous cycle has been operating in the corporate sector, triggered by a recovery in overseas economies. that

based on quantitative and qualitative monetary easing ( qqe ) with yield curve control, the sustainability and nimbleness of which were enhanced following the assessment conducted this march. conclusion lastly, let me talk about the bank's monetary policy actions to address climate change. since climate change may have an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium - to long - term perspective, it is relevant to central banks'mandate. it is widely recognized that, due to the existence of so - called externalities, climate change cannot be solved through the market mechanism alone and involvement by the public sector is essential. furthermore, since a transition to a decarbonized economy will require large - scale investments in capital equipment and research and development over a long period of time, there are growing expectations for the financial sector to play its part. against this background, the bank decided to introduce a new fund - provisioning measure to provide funds to financial institutions against various investments or loans they make to address climate change ( chart 10 ). the details of the measure were decided at the monetary policy meeting held last week, and the fund - provisioning likely will start within this year. not only financial institutions but a wider range of entities including firms and households are required to make active efforts in pushing forward with actions toward addressing the pressing global issue of climate change. while environmental policy of course falls under the responsibility of the government and parliament, i hope that the bank's new fund - provisioning measure will serve as a catalyst to further encourage climate - related efforts by the private sector. thank you very much for your attention. japan's economy and monetary policy speech at a meeting with business leaders in osaka ( via webcast ) september 27, 2021 kuroda haruhiko governor of the bank of japan introduction i. developments in economic activity and prices ii. the bank's conduct of monetary policy conclusion chart 1 i. developments in economic activity and prices real gdp comparison to the pre - pandemic level s. a., contribution to real gdp, % points economic activity by sector s. a., cy 2019 = 100 manufacturing - 2 - 4 accommodations, eating and drinking services services for amusement and hobbies transport private consumption - 6 business fixed investment - 8 goods exports other - 10 - 12 cy nonmanufacturing real gdp jan. jul. july jan. jul. july jan. jul. july notes : 1. the left - hand chart