views on what kind of economy and society we aim at by overcoming deflation while looking back at the developments in japan ’ s economy from a medium - to long - term perspective. i. the problem of deflation the word “ deflation ” is generally understood as referring to a state in which prices decline persistently. since the latter half of the 1990s, japan ’ s economy has been in deflation for nearly 15 years ( chart 3 ). during that period, japan ’ s economy was caught in various negative shocks : the nonperforming loan problem and the asian currency crisis in the latter half of the 1990s, and a burst of an it bubble in the united states, the lehman crisis, and the great east japan earthquake after the turn of the 2000s. in addition, there were many factors that put direct downward pressure on prices, such as an inflow of inexpensive import goods from emerging economies, firms ’ low - price strategy amid intensified competition associated with deregulation, and reduction in the wage level due to an increasing use of non - regular employment. while it is not easy to specify the causes of deflation, what is important is that deflation was not only a result of economic stagnation but also a cause that protracted economic stagnation. namely, amid nearly 15 years of deflation, behavior based on bis central bankers ’ speeches recognition that “ prices would not rise ” or “ prices would moderately decline ” has been embedded in the economy. let me explain somewhat in detail about that point. viewed from firms ’ side, under deflation, as they cannot raise the prices of their products and services, their sales will not increase and profits will hardly increase. therefore, firms will restrain labor costs and business fixed investment as much as possible. for households, as wages will not increase, consumption will be restrained. in addition, if future prices are to decline, they will become more inclined to defer consumption as much as possible. they will be better off if they buy after prices decline. if consumption is restrained in such a manner, firms will be forced to reduce the prices of their products and services. as a result, a vicious cycle of a decline in prices, a decrease in sales and profits, a restraint in wages, a slump in consumption, and a decline in prices will continue. what is important here is that both firms and households are acting rationally as respective economic entities. notwithstanding each entity taking action considered rational, it leads to a bad result as

. moreover, in addition to the utc and the banks, other institutions ( from less regulated environments ) have entered or are seeking to enter the market. these developments have prompted the central bank and the securities and exchange commission to initiate a study that would help clarify a number of issues pertaining to the market. specifically, we are seeking to know more about : - the structure of the funds ; - the value of the funds under management according to the jurisdiction of origin of the funds ; - the degree of cross - listing of the various funds in the market place ; and - the fund management strategies employed, with special emphasis on fund nomenclature, fee structures and performance presentations. at the same time, the sec is formulating urgent mutual funds legislation that would cover : ( i ) increased disclosure : for example, mutual fund managers will be required to reveal in their prospectuses, the general and specific risks, the suitability of the funds for various types of investors, fees and expenses, relationships that may give rise to potential conflicts of interests. ( ii ) the new regulations would make all actors in the mutual funds industry ( managers, custodians, trustees and sales persons ) subject to licensing requirements. ( iii ) the regulations will seek to address the practice of imprecise or misleading nomenclature ( for instance a bond fund must be investing in public or private sector bonds and an energy fund must be investing in energy projects ) ; and ( iv ) finally, the regulations would deal with risk - based capital requirements for promoters of mutual funds. conclusion ladies and gentlemen, the government ’ s vision is to make trinidad and tobago a pan - caribbean financial centre that is globally competitive, well diversified, responsive and market – driven. aic fits very well into that vision. aic has a regional and international reach but with a local feel. in its short existence, aic has already demonstrated the spunk to challenge the status quo and to bring greater competition to a financial sector, which, if anything, suffers from too much concentration. aic ’ s entry, in the banking market and now in the mutual funds industry is good for the industry because it will prompt greater efficiency, lower cost and provide more consumer choice. we wish aic a long and successful and mutually - beneficial involvement in the financial sector of trinidad and tobago.