tight labor market conditions, and steady consumer sentiment have been maintained, supporting domestic demand in each country even with the deceleration in the manufacturing sector. that said, there is no guarantee that this decoupling will last for a long time. if the slowdown in the manufacturing sector becomes prolonged, its impact could spread gradually to the nonmanufacturing sector and households. in contrast, if adjustments in the manufacturing sector mostly come to an end while domestic demand remains resilient, the global economy is expected to return to a growth path. on this point, the bank considers it highly likely that the latter scenario will be realized - - that is, the global economy will pick up gradually. let me point out two factors that are the basis for the realization of this scenario. the first is that there has been some progress in dealing with the problems that were at the root of the global uncertainties, such as the u. s. - china trade negotiations and the united kingdom's exit from the european union ( eu ). if overall uncertainties wane to some degree in reflection of such progress, firms are likely to take more positive actions, although the bank judges that uncertainties regarding the global economy are still significant, as i will talk about later. the second is that adjustments in the global manufacturing sector have progressed and business sentiment has improved ( chart 3 ). in the it - related sector in particular, inventory adjustments have progressed globally and world semiconductor shipments have picked up. as for the outlook for this sector, demand related to data centers and the 5g network is expected to increase, thereby pushing up production activity. the bank's projection is consistent with those presented by international organizations. for example, in the imf's world economic outlook update, the global growth rate is projected to rise from 2. 9 percent for 2019 to 3. 3 percent for 2020 ( chart 1 ). b. current situation of and outlook for japan's economy next, i will turn to economic developments in japan. the slowdown in the growth pace of the global economy also has affected japan's economy, mainly through somewhat weak external demand. reflecting this slowdown and such effects as of the consumption tax hike and natural disasters, japan's economy seems to have briefly registered a significant deceleration in the october - december quarter of 2019. however, the bank considers at this point that such deceleration is temporary and that japan's economy has been on a moderate expanding trend.

christian noyer : no moral hazard – the banks are doing their job comment by mr christian noyer, governor of the bank of france, in the financial times, 18 september 2007. * * * in recent weeks, central banks in europe and the us have acted repeatedly to provide liquidity to interbank money markets. these interventions have raised some questions. concerns were expressed that monetary authorities were bailing out speculators, thus creating the same kind of moral hazard that may have led to excesses in the past. there were also concerns as to whether the integrity of monetary policy would be compromised. these are valid questions. on numerous occasions, in the past, we pointed out the potential dangers that mispricing of credit risk posed for financial stability. we may be now seeing some of the consequences. excessive risks were taken, and losses will have to be accepted. it is important that monetary and financial authorities take no action that would prevent this process from running its course, let alone be seeing to be condoning past or future excesses. however, the logic behind recent interventions is different. put very simply, financial turbulence and uncertainty have suddenly triggered an upward shift in the demand for central bank money. faced with such a shift, whose direction is apparent but amplitude uncertain, the choice, for monetary authorities, is clear : either accommodate, and provide temporary liquidity ; or not, in which case, interest rates would have to rise to restore balance in the interbank market. standard economic theory dictates that, in such circumstances, exogenous changes in money demand should indeed be accommodated. in a seminal article going back to 1970 1, william poole showed that, when there is uncertainty about money demand, the optimal response is to stabilize the interest rate, thus letting money supply adjust. since short - term interest rates are, for all central banks, the main policy tool, an increase in interbank rates over and above the official rate would indeed be tantamount to a shift in monetary policy. in contrast, liquidity provision by central banks has ensured that the overall policy stance has remained unchanged. a clear distinction has been – and will be – maintained between temporary liquidity provision, on the one hand, and medium term oriented monetary policy, on the other. should liquidity be provided at a penalty rate, as some have argued, to avoid moral hazard? the answer is clearly positive if and when liquidity assistance is targeted at specific institutions. but there is no reason, for central