masaaki shirakawa : recent developments in japana€™s economy and the conduct of monetary policy statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank's semiannual report on currency and monetary control, before the committee on financial affairs, house of representatives, tokyo, 13 march 2009. * * * introduction i am pleased to have this opportunity to present an overall review of the bank of japan's conduct of monetary policy. the bank submitted to the diet its semiannual report on currency and monetary control for the second half of fiscal 2007 on june 10, 2008 and that for the first half of fiscal 2008 on december 12, 2008. today i would like to talk about recent developments in japan's economy and the conduct of monetary policy. i. developments in japan's economy japan's exports have been decreasing substantially reflecting a slowdown in overseas economies, and domestic demand has become weaker against the background of declining corporate profits and the worsening employment and income situation in the household sector. financial conditions have remained tight, as shown by, for example, a continued increase in the number of firms, especially small firms, reporting that their financial positions are weak and lending attitudes of financial institutions are severe. under these circumstances, economic conditions have deteriorated significantly and are likely to continue deteriorating for the time being. on the price front, domestic corporate goods prices have been decreasing, mainly due to the drop in international commodity prices. the year - on - year rate of increase in the cpi ( excluding fresh food ) has recently moderated reflecting the declines in the prices of petroleum products and the stabilization of food prices, and, with increasing slackness evident in supply and demand conditions, will likely become negative in the future. there are risks to the outlook for economic activity and prices. much depends on global financial conditions as well as developments in overseas economies, and particular attention will need to be paid to the downside risks to economic activity. in addition, there is the risk of a further weakening in domestic private demand if firms'medium - to long - term growth expectations decline and pressures to adjust capital stock and employment increase. if financial conditions should tighten further, pressures acting to depress economic activity from the financial side might become more marked and the adverse feedback loop between financial and economic activity might intensify. turning to prices, there is a possibility that the inflation rate will decline further if downside risks to economic activity materialize or commodity prices

banking and payment services. this represents only 1. 8 % of the 25 million mobile phone subscribers in the country. there is, therefore, a significant untapped, and potentially lucrative market for mobile payment and banking services. pushing mobile channel beyond the tipping point of development there are fundamental issues that need to be addressed if we are to realise the opportunities and allow malaysia to take full advantage of new mobile technologies. to achieve their full potential, it is important to identify the gaps in the service offerings, and plan the way ahead for malaysia to make the quantum leap in e - payment adoption. market participants need to address the mismatch between what consumers expect and what is being offered. openness and inter - connectivity are also critical in the mobile banking and payment initiatives. exclusive and proprietary services where the target market is limited to the customer base of individual mobile operators or individual banks will not allow for the potential to be realised. any lack of interoperability across mobile operators and across banks will not achieve the required critical mass and will also result in high transaction cost for consumers. it is hoped that market participants will be able to offer new and innovative mobile payment products and services that opens up new markets for mobile service providers and payment operators, offer the convenience at reasonable costs and thus deliver the cost savings and efficiency gains that consumers and businesses seek, and thus allow for the economic benefits to be realised. industry players also need to work together. an area that needs critical attention is for the industry players to focus on the bigger picture and regard the mobile phone as a mechanism towards achieving a common goal. to promote the significant use of the mobile phone for financial services, the industry has to respond rapidly to address the need for interoperability and collaborate in areas such as developing a common infrastructure, common payment messaging format, as well as common security and authentication standards. common standards and infrastructure will create an accessible, open and vibrant payment eco - system that will attract a wider consumer base allowing all market participants to reap the benefits of a larger customer base. a shared integrated network with common security standards and common messaging standards will make it easier, more cost - effective, and more convenient for consumers, merchants and service providers to execute and receive payments, thereby increasing the attractiveness of the mobile network as a payment channel. such collaboration will also lead to greater innovation and increased productivity that will contribute to the overall effectiveness and performance of the mobile payment system. in delivering products that the market demands, substantial investments would be required of