bank of japan ’ s november report of recent economic and financial developments1 bank of japan, communication, 20 november 2000. * * * the bank ’ s view2 japan ’ s economy is recovering gradually, with corporate profits and business fixed investment continuing to increase. with regard to exogenous demand, public investment is decreasing gradually since the implementation of the supplementary budget for fiscal 1999 has peaked out. net exports ( real exports minus real imports ) continue to follow a moderate upward trend due to steady developments in overseas economies. as regards domestic private demand, business fixed investment is on an increasing trend. the recovery in private consumption continues to be weak as a whole through lack of notable improvements in employment and income conditions, although there are somewhat positive signs in some indicators. housing investment is mostly unchanged. reflecting such developments in final demand, industrial production is increasing. corporate profits and sentiment continue to improve, and the number of firms that take positive action, such as increasing the amount of fixed investment, is increasing, especially in high - growth sectors. income conditions of households still remain severe but regular and overtime payments as well as new job offers continue to increase in line with the recovery in corporate activities, and compensation of employees has stopped decreasing. as for the outlook, public investment is expected to continue decreasing for the time being. while the u. s. economy is decelerating gradually, the expansion in overseas economies is projected to continue, albeit at a slower pace. in these circumstances, the increase in exports is likely to slow down, as inventories of some raw materials and electronics parts are somewhat excessive at present in asian economies. meanwhile, imports are projected to continue increasing, particularly for those of consumer goods, and capital goods and parts. therefore, net exports will level off for a while. in the corporate sector, firms still strongly feel that they have excess equipment and that they should reduce their debts to restore financial soundness. however, it is very likely that fixed investment in highgrowth sectors, including those related with information technology services, will increase as corporate profits continue to recover. moreover, an improvement in corporate profits will increase household income and this in turn is expected to boost private consumption. however, the pace of recovery in household income will be modest for the time being, since firms ’ perceptions of excess employment still persist, and thus significant changes have not been observed in their efforts to reduce personnel expenses. the increase in industrial production is expected to slow down somewhat for a while mainly because of the slower rise in

masaaki shirakawa : the turmoil in global financial markets and economic and financial developments in japan speech by mr masaaki shirakawa, governor of the bank of japan, at the kisaragi - kai meeting, tokyo, 5 november 2008. * * * introduction i am very privileged to have the opportunity to speak before such a large audience. as you all know, global financial markets are currently experiencing a type of turmoil not seen since the 1930s. strains in the markets have mounted significantly, especially since the bankruptcy filing of lehman brothers in september. it is difficult for a central bank to choose the right words to express this situation, but the blunt phrase " financial crisis " was used in the joint statement by major central banks released in october. the degree of strains in financial markets, although they have recently improved somewhat, has increased to a level that has obliged us to use such a strong phrase. the turmoil in financial markets that began in the summer of 2007 as well as its impact on economic activity were, at first, limited to the u. s. and european economies, but have since gradually spread to japan as well as to emerging economies. this global turmoil has now become the largest problem facing the world economy, although the degree of impact varies by country. in my speech today, i would like to first discuss developments in global financial markets and overseas economies, given that current developments in japan's economy are being overwhelmingly influenced by them. after that, i will discuss the outlook for japan's economic activity and prices, and then the bank of japan's conduct of monetary policy, including the reduction in the policy interest rate decided at the monetary policy meeting held on october 31. and lastly, i would like to touch on how a financial crisis should be dealt with and how, from a longer - term perspective, similar crises can be prevented in the future, based on our experience with the one that occurred in japan. i. developments in global financial markets and overseas economies i will begin by discussing developments in global financial markets and overseas economies. looking back, until recently the world economy enjoyed a sustained period of benign economic conditions. the statement released after the meeting of the group of seven ( g - 7 ) finance ministers and central bank governors in april 2007, for example, indicated, " although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced. " all of you here are familiar with developments in the world economy since then