percent for fiscal 2012, and 0. 5 percent for fiscal 2013. compared to the forecasts made in july, figures were revised downward, mainly because of the change in the base year for the cpi, which takes place every five years and was conducted in august 2011. the base year is changed to revise the composition of the cpi basket and the weight of individual items, so that the cpi reflects changes over time in the variety of goods consumed, in lifestyles, and in consumer behavior. as a result of the base - year change, the average year - on - year rate of change in the cpi for january – july 2011 was revised downward by 0. 6 percentage point. d. uncertainty regarding the outlook while uncertainty persists regarding the outlook for japan ’ s economy both in terms of upside and downside risks, developments with respect to the following downside risks in particular require close attention. first, it remains highly uncertain how the european debt crisis will unfold. it will likely take a long time before the crisis is resolved. at the euro summit held on october 26, agreement was reached among the member states of the euro area on the reduction of greek debt, the strengthening of european financial institutions ’ capital bases, and the boosting of the lending capacity of the european financial stability facility ( efsf ) aimed at serving as a safety net at a time of crisis. the announcement of the agreement on these issues temporarily calmed international financial markets. however, as shown by the subsequent turmoil in the domestic political situation in greece and the discussions at the group of 20 ( g - 20 ) leaders summit in cannes, the details and implementation of the comprehensive set of additional measures agreed at the euro summit as well as the austerity measures of the relevant countries remain extremely uncertain. consequently, market participants remain wary with regard to the creditworthiness of european financial institutions. for example, interest markups, which serve as a risk premium, in interbank funds transactions in europe remain elevated and the situation is still tense. this is because the european debt crisis is no bis central bankers ’ speeches longer confined to the problems of countries with excessive liabilities, such as greece and italy, but is spreading throughout the euro area, and – triggered by a fall in confidence in bonds issued by these heavily indebted countries – a negative feedback loop has started to operate in which the decline in creditworthiness of european financial institutions and growing downward pressure on economic activity reinforce each other. under these circumstances, with the

negative effects on other domestic industries through the input - output relationship, although it reduced imports of materials. the diversification of demand and supply sources just described led to asynchronicity in production activity and resulted in canceling - out of small shocks in sectoral demand and supply, leading to a stable growth pattern. however, this also meant that we did not have a strong engine of growth affecting all sectors, and thus the speed of economic expansion was moderate. in fact, the recovery since 2002 has been led mostly by the corporate sector, for details of this assessment, see kiyohiko g. nishimura, " increased diversity and deepened uncertainty : policy challenges in a zero - inflation economy, " international finance 10 : 3 ( 2007 ), 281 - 300, which is based on my speech at the brookings institution in july ( http : / / www. boj. or. jp / en / type / press / koen07 / ko0707a. htm ). especially exporting firms. corporate profits exceeded their previous peak and corporate fixed investment increased steadily. however, since growth was at best moderate, firms remained cautious in increasing their labor force and production capacity, and maintained their restrictive stance on wage increases. although this cautiousness apparently has prevented firms from accumulating excess production capacity and excess labor so far, it has resulted in sluggish wage increases and ultimately, in a lackluster state of consumption. the current state of the japanese economy in this way, the japanese economy enjoyed not so strong, but stable and resilient, economic growth until the end of last year. since then, however, the growth rate has slowed. first, there was the shock caused by a stringent revision of the building standard law, resulting in a fall in housing and construction investment. then came a sharp increase in energy and materials prices, which has caused a substantial transfer of income from japan to oil and materials exporting countries. this decrease in real income had an adverse effect on both private consumption and corporate fixed investment. the decrease in corporate fixed investment has been noticeable especially among small and medium - sized enterprises that rely mostly on domestic demand and therefore do not benefit from strong increases in exports. recently, exports have lost their momentum, reflecting the gradual slowdown of the world economy. the turmoil in the u. s. financial markets, which stemmed from the u. s. subprime mortgage problem, has affected economic activities in the u.