follow a stable growth path with authorities conducting fiscal and monetary policies in a timely manner, despite being affected to some extent by the trade friction with the united states and deleveraging policy measures. in addition, the european economy is projected to gradually move out of its deceleration phase, reflecting progress in adjustments in the manufacturing sector, where relatively weak developments have been observed. that said, the downside risks concerning overseas economies have remained significant, and uncertainties regarding the effects of protectionist moves in particular have been heightening. although the united states and china are still in negotiations to solve the trade issues, future developments in u. s. trade policy against china, as well as other economies, continue to warrant attention. besides this trade friction, uncertainties concerning overseas economies include ( 1 ) the timing of when the effects of stimulus measures in china will materialize, ( 2 ) how far the adjustments in it - related goods will progress, and ( 3 ) the consequences of negotiations on the united kingdom's exit from the european union ( eu ). it is necessary to pay attention to the risk that, if uncertainties concerning overseas economies heighten further going forward, domestic and foreign economies will be affected widely, not only through downward pressure on the trade activity of related economies but also deterioration in business sentiment and instability in financial markets. thus, the bank will carefully monitor whether overseas economies will pick up during the time when domestic demand, as i referred to earlier, is maintained firmly. ii. price developments next, i will explain price developments in japan ( chart 7 ). for many years starting from the late 1990s, japan's economy was in deflation in terms of a sustained decline in the consumer price index ( cpi ). in order to make a breakthrough in this situation, the bank introduced quantitative and qualitative monetary easing ( qqe ) in april 2013, embarking on unprecedentedly powerful monetary easing. since then, japan's economy has improved significantly and the positive annual cpi inflation has taken hold. thus, the economy is no longer in deflation, in the sense of a sustained decline in prices. turning to recent price developments, the year - on - year rate of change in the cpi is at around 0. 5 percent and has continued to show relatively weak developments compared to the economic expansion and tight labor market conditions. however, with the economy continuing on an expanding trend, the basic mechanism for moderate increases in wages and prices driven by a positive output gap has continued to

. the real gdp growth rate for the july - september quarter of 2015 increased by an annualized quarter - on - quarter growth rate of 1. 4 percent, which exceeds the potential growth, due mainly to an increase in domestic private demand. that for the octoberdecember quarter registered minus 1. 1 percent on an annualized quarter - on - quarter basis, due partly to the effects of irregularly warm weather. as for the outlook, although the sluggishness in exports and production will probably remain for some time, domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the household and corporate sectors, and exports are expected to increase moderately on the back of emerging economies moving out of their deceleration phase. thus, japan ’ s economy is likely to be on a moderate expanding trend. specifically, the economy is expected to continue growing at a pace above its potential through fiscal 2016. thereafter, through fiscal 2017, it is projected to maintain its positive growth, although with a slowing in its pace to around a level somewhat below the potential growth rate, due mainly to the effects of a front - loaded increase and subsequent decline in demand prior to and after the consumption tax hike planned in april 2017. according to the bank ’ s january 2016 outlook for economic activity and prices ( hereafter the outlook report ), the medians of the policy board members ’ forecasts for the economic growth rate – 1. 1 percent for fiscal 2015, 1. 5 percent for fiscal 2016, and 0. 3 percent for fiscal 2017 – were more or less unchanged from the forecasts presented in october 2015. 2. prices next, i will talk about price developments. the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food has generally been about 0 percent, with the decline in energy prices and the increase in non - energy prices broadly offsetting each other. the rate of change for all items less fresh food and energy – one of the indicators that capture the underlying trend in the cpi – has remained positive for 28 months and has been at a level above 1 percent recently. in addition, looking at annual price changes in all cpi bis central bankers ’ speeches items less fresh food, the share of price - increasing items minus the share of price - decreasing items has shown a marked increase since spring 2015, albeit with some fluctuations. with regard to the outlook, the year - on