8 percent from the previous quarter ( chart 2 ). covid - 19 has exerted considerable downward pressure on aggregate demand in japan's economy through the following three major channels : ( 1 ) goods exports ; ( 2 ) inbound tourism demand ; and ( 3 ) domestic private consumption. the output gap - - which represents the balance between the aggregate demand and average supply capacity - - narrowed within positive territory for the january - march quarter, reaching almost 0 percent. given the deterioration in the diffusion indices ( dis ) related to employment and business fixed investment in the bank of japan's june 2020 tankan ( short - term economic survey of enterprises in japan ), it is quite likely that the gap will become negative for the april - june quarter ( chart 3 ). in what follows, i will outline each of the three channels through which covid - 19 has exerted downward pressure on aggregate demand in japan's economy. the first is exports. exports, mainly of automobile - related goods to the united states and europe, declined substantially in the april - may period, when each country imposed strict limits on movement in order to contain the spread of covid - 19, and the recovery thereafter has been sluggish. meanwhile, exports to china, where economic activity resumed first, have continued to pick up. the second channel through which covid - 19 has exerted downward pressure is inbound tourism demand. inbound demand centered on tourism had been one of the major driving forces in japan's economy, as indicated by the fact that the number of visitors to japan exceeded 30 million in 2019. unfortunately, however, this demand has almost evaporated due to the global spread of covid - 19. the outlook for inbound tourism demand is extremely severe as it is expected to remain subdued for as long as entry restrictions continue. the last channel is domestic private consumption. this marked a large decline particularly in the april - may period, when the state of emergency was in place. since then, it has been gradually heading toward a pick - up, along with the resumption of economic activity. nevertheless, the pace of the pick - up will likely be quite moderate, mainly for dining - out and services for individuals, due to vigilance against covid - 19 and the need to ensure social distancing. in addition, the propensity to consume will likely remain at a somewhat low level compared with the past average, mainly due to a rise in concern over future

of exchange controls the existing exchange controls in the region were analysed by a sub - committee of the governors ’ committee with a view to gradual harmonisation. participating countries are being encouraged to remove remaining exchange controls for transactions within the region as quickly as possible. arrangements were made for the repatriation of banknotes amongst participating countries, and for an easing of private sector investments across borders in the region. three countries, i. e. botswana, mauritius and zambia, have removed all exchange controls and some others are making steady progress in the implementation of this programme. a vision for the future as already mentioned, the sadc organisation is a political association that covers a much wider objective than just financial cooperation within the region. this wider objective, however, has more potential for disputes and friction, and will also at times be constrained by the red - tape of a long drawn - out inter - governmental decision - making process. i believe that the committee of governors of the central banks of sadc provides a unique body that should be able to proceed with a programme of financial cooperation in the region, without being unduly constrained by the more complex political decision - making processes. at this stage, i believe work should continue to proceed on the accepted road of focusing on identified projects that can be developed on a regional basis without full economic integration of the 14 countries now forming part of sadc. most of these programmes will also not require any formal inter - governmental agreements. in the process, we shall provide a basis for gradual but effective cooperation and integration of the financial systems and markets of southern africa. in the longer term, the vision should be : • to make it possible for residents of the whole sadc region to move funds around within the region without formal exchange control restrictions or border controls ; • to make it possible for residents of the region to invest in the shares of companies in every country of the region without restriction, to buy and sell on any one of a series of closely - linked stock exchanges, and to arrange for settlement anywhere in the region ; and • to make it possible for business people to do their business, whatever kind of business it might be, anywhere in the region without any undue financial restriction. to reach these objectives, however, i believe that the central banks of the region should, for the time being, continue to work on an almost informal way to establish a sound basis for the more ambitious plan of eventual full economic integration of the region. the momentum built up over the past