. when a negative shock happens to diminish growth prospects, management refrains from engaging in capital investment and giving pay raises, and households cut consumption expenditures to increase savings for the future. if a fall in growth expectations were a one - off event, price levels would stabilize soon after necessary adjustments were made. however, when such a decline happens several times, a chronic demand shortfall would keep placing downward pressure on price levels and deflation would persist. persistent deflation may also have been caused by the following mechanism that operates through the price - and wage - setting behavior of firms. japanese export firms dealt with the severe competition coming from low - cost emerging countries by cutting costs – that is, cutting wages and delivery prices. this had a spillover effect on the non - manufacturing and public sectors in japan, resulting in a fall in the general price level. this led to an appreciation of the japanese yen through the purchasing power parity ( ppp ) mechanism. as this currency appreciation partly offsets the effects of initial cost cuts by export firms, the whole cycle starts once again, beginning with cost cuts by firms. deflation persists in that process. see reinhart and rogoff ( 2012 ) and imf ( 2009 ). the impact of population ageing is multifaceted. obviously, it creates the financial burden of supporting a larger older population with a smaller younger generation, leading to fiscal problems. the dominance of elderly consumers changes the demand structure and thus necessitates structural changes in corporate bis central bankers ’ speeches advancements is another element that deserves more extensive discussion, especially in terms of its impact on employment. 4 in my remarks today, i explain my own view about the role of the central bank in a slow growth environment, which is distinctively schumpeterian, and describe the policies adopted by the bank of japan from this viewpoint. but first, let me briefly review the development of the real growth rate in japan and other advanced countries. ii. evolution of post - crisis economic growth : japan as a spearhead of change japan has an extraordinary history of real gdp growth over the past six decades, from the annual average of a roaring 9. 7 % in the 1960s to a meager 0. 6 % in the 2000s, as depicted in chart 1. chart 2 decomposes real gdp growth into the growth in labor productivity and that of labor inputs. note that the peak of the japanese property bubble is around 1990. comparing pre - bubble growth ( 1980s

january 17, 2019 bank of japan opening remarks at the g20 finance and central bank deputies meeting haruhiko kuroda governor of the bank of japan good afternoon. it is a great honor for me to work with you and to serve as co - chair with minister aso at the g20 finance ministers and central bank governors meetings this year. the g20 was established in 1999, twenty years ago. it was the year when the euro was introduced and two years after the asian financial crisis. i attended the inaugural meeting in berlin as vice - minister of finance for international affairs. the main objective of the g20 was to promote cooperation among systemically significant economies including emerging market economies, in order to achieve stable and sustainable global growth. later, the leaders'summit was initiated in response to the global financial crisis in 2008, and the g20 played a significant role in coordinating policy responses to the crisis. since then, as the world economy has recovered from the crisis, the g20 has discussed a wide range of issues to promote strong, sustainable, balanced, and inclusive growth. while the role and agenda of the g20 have evolved over time, i would like to point out three important values that have been emphasized consistently, based on my long - time involvement in the g20 since its inauguration. first, we recognize that the expansion of cross - border transactions of goods, services, and finance will benefit all countries. we need to conduct policies so that many people can enjoy the positive effects of international trade and capital flows on growth and productivity gains, while minimizing their potential negative impacts. second, we need to be forward - looking in preparing for policy responses to medium - to long - term challenges. for instance, under japan's presidency this year, we will discuss policy responses to aging. japan is currently the most aged society in the world. sooner or later, however, other economies will face a similar situation. many issues must be considered in our efforts to cope with an aging society, including fiscal, monetary, and structural policies. i believe the g20 provides a valuable forum for discussion and mutual understanding of these issues. third, we value the importance of inclusive growth, that is, the dividends of economic growth should be distributed fairly and equally across the whole society. the g20 has discussed policy agendas to enhance the overall living standards of low - income countries in a sustainable manner. in addition, we need to address the increasing inequality in advanced economies as well, taking