support economic growth. however, after the collapse of the bubble and the ensuing financial crisis in the 1990s, the pace of growth fell below that of major advanced economies. three elements led to the prolonged period of economic weakness following the collapse of the bubble. first, of course, there was the direct effect of the collapse of the bubble. balance sheet problems in the private sector constrained expenditures and the credit intermediation capabilities of the banking sector, saddled with non - performing loans, deteriorated. this led to weak growth during the 1990s, but was not the cause of the tepid growth during the past decade. second, the business model which had supported the strong growth of japanese firms was no longer compatible with the changed economic environment. the strength of japanese firms was the pursuit of operational efficiency enabled by large scale production and sales. you all know the detailed management of production and inventories through the “ just - in - time process ” and the “ kaizen system ” which has become a part of the english language. such pursuit of efficiency gains is naturally important. but as other countries such as the asian emerging economies rapidly catch - up with advanced economies through technological progress, global competition becomes more intense and increased profits cannot be generated simply through such efficiency gains. according to a study which analyzed the production costs of iphones ( slide 6 ), of the 500 dollar sales price of the iphone, component costs add up to 173 dollars and assembly costs account for only 6. 5 dollars. accordingly, gross profits reach 321 dollars. in other words, the added value for coming up with a product concept and developing it into a product is now quite significant. third, demographics have changed ( slide 7 ). our country ’ s working - age population, in other words population between the ages of 15 and 64, began to decrease in the mid - 1990s. our society is ageing at a very rapid pace. the share of people 65 and above went from 9 % in 1980 to 23 % in 2009. such rapid ageing has never been seen in past economic history. japan had experienced the “ population bonus ” based on working - age population during the high - growth period. but now it has entered the “ population onus ” stage2. there is no consensus on the definition of “ population bonus period ” and “ population onus period ”. government reports and academic papers on demographic studies often focus on the level of the working age bis central bankers ’ speeches iii. comparison of high - growth periods : japan and

, they would have a significant negative impact on corporate profits, as well as business and consumer confidence. at present, however, the mechanism for japan ’ s self - sustaining economic recovery remains intact. looking at recent developments in economic activity in more detail, exports continue to be on an uptrend, although there has been a deceleration in those to east asian and other emerging economies that had supported japan ’ s high export growth. meanwhile, production has been increasing as a trend, although the pace of increase has been decelerating gradually when the effects of the distortion in seasonal adjustments are taken into account. among domestic demand components, business fixed investment is showing signs of picking up, given the favorable business performance. according to the financial statements statistics of corporations by industry, quarterly, business fixed investment started to increase in the april – june quarter of 2010, after having declined throughout the january – march quarter. private consumption has been generally picking up, as shown by ( 1 ) an increase in consumer spending on such items as beverages and air conditioners due to this year ’ s extremely hot summer, and ( 2 ) a significant increase in car sales in august, reflecting a last - minute increase in demand ahead of the termination of government subsidies for purchasers of environment - friendly cars. at the same time, housing investment has been leveling out : the number of housing starts increased for two consecutive months, and the contract rate on newly built condominiums in the tokyo metropolitan area remains above 70 percent. there are signs that employment and income are improving, although the ratio of job offers to applicants remains low and the unemployment rate is relatively high. that said, household income has been improving moderately, reflecting the year - on - year rise in summer bonus payments. in assessing the trend in the consumer price index ( cpi ), it is necessary to exclude fresh food, the prices of which tend to be volatile, as well as the effects of subsidies for high school tuition, which are a one - off downside factor and part of the government ’ s economic stimulus measures to reduce the cost of high - school education. the cpi, excluding these two factors, has recently been hovering around minus 0. 6 percent. it declined significantly in summer last year, but it now appears to be recovering. the year - on - year rate of decline has been narrowing mildly, and this trend is likely to continue, reflecting the narrowing negative output gap. regarding the outlook for japan ’ s economy, movements toward a self -