role in that regard, but it can make important contributions. that is, by dispelling the deflationary mindset. when the deflationary mindset is widespread, cash hoarding and maintaining the status quo are considered rational. proactive behaviors by taking risks do not result in rewarding a sufficient return. in fact, under the period of protracted deflation, firms have become reluctant to take risks, such as investing in capital stock and in research and development, resulting in a decline in the potential growth rate. dispelling the deflationary mindset and creating an economy, in which private entities can act based on an assumption of 2 percent inflation, will lead to reviving the animal spirits of firms that were lost in the prolonged deflationary period and thereby enhancing growth potential. that is evident if you recall that positive developments have become widespread among firms since last year as prices started to rise. the bank will firmly support such positive developments through achieving the price stability target of 2 percent at the earliest possible time. while some question whether it will be desirable to increase prices when the potential growth rate is low, my answer will be a clear “ yes. ” overcoming deflation and raising growth potential is not an issue of which comes first. overcoming deflation is an important prerequisite for raising growth potential. the bank will achieve the price stability target of 2 percent. in that situation, i am convinced that japan ’ s economy will achieve a higher potential growth rate. thank you. bis central bankers ’ speeches

benefits from a prospering economy, because the demand for financial services from companies and private households increases, not least in the area of management and investment of assets. switzerland is a prime example of the positive interdependency between financial developments, on the one hand, and overall economic prosperity, on the other. in terms of the usual indicators of the financial development of a country – such as the size of the financial sector or access to financial services – switzerland has one of the most advanced cf. levine 2005. bis central bankers ’ speeches financial systems in the world. 2 at the same time, the economic importance of the banking industry in this country is above average. it generates an annual gross value added of some 6 % of gdp and currently employs about 150, 000 people. in addition, at least in the years before the financial crisis, the industry made a significant contribution to overall economic growth. 3 when banks are familiar with the local conditions and are also able to integrate knowledge concerning swiss macroeconomic conditions into their business decisions, this enables them to provide particularly efficient services to the swiss economy. it is therefore advantageous for our country to have locally established banks which make their decisions here in switzerland. it is not only with services which benefit companies and households located in switzerland that the swiss banking industry creates value added. as we all know, the industry is also very active in the international arena – on the one hand, via exports, 4 that is, through the cross - border provision of financial services from switzerland, and on the other, through its actual presence abroad. in this respect, the most important source of income is the crossborder wealth management business for private customers. with a share of an estimated 26 % of the world market, the swiss banking centre is the leader in this area. 5 in addition, the two big banks, ubs and cs, are among the most important institutions worldwide in some areas of investment banking, such as derivatives and foreign exchange trading. how did switzerland, a comparatively small country, end up with a banking centre with such a wide international reach? a number of different elements may serve to explain this. first, i would like to mention the conditions which make the banking centre attractive for international investors. they include political, legal and economic stability, reliable banks, and a convertible currency whose value remains stable. in addition, a role in the steady inflow of foreign funds was played by the banking secrecy provisions established in 1934 and the enhanced protection of privacy associated