the summer of this year. overseas, emerging economies are expected to continue growing at a high pace. in the united states and europe, the growth rate is likely to increase as the after - effects of the financial crisis wear off. as a result, japan ’ s exports and production are expected to maintain their favorable conditions, and that benefit will spread to exporting firms as well as their related firms in japan. if exports and production increase, firms ’ sales will increase and corporate profits will improve. since capacity utilization will increase as the production level rises, the firms ’ sense of excessive capacity will fade away, albeit moderately, and their motivation for business fixed investment could be stimulated. furthermore, such favorable conditions in the corporate sector are likely to spread to the household sector. as corporate profits further improve, expansion in new employment and recovery in wages will likely take place. moreover, the decline in anxiety about employment and future income will also have positive effects on household consumption. as such, japan ’ s economy as a whole is expected to gradually increase its growth rate, with the improvements in the corporate sector originating from exports spilling over to the household sector. the bank releases every quarter its outlook for economic activity and prices for about two years ahead. the real economic growth rate is projected to decline significantly in fiscal 2009 to minus 2. 5 percent, but gradually go up to 1. 3 percent in fiscal 2010 and 2. 1 percent in fiscal 2011. of course, the economy changes daily. if the external environment and behavioral patterns of firms and households change, the outlook might be revised upward or downward. of those uncertainties, let me touch on two factors that i consider to be especially important. one is developments in overseas economies. as i have explained so far, japan ’ s economic outlook will be affected greatly by overseas economic developments. of those, emerging economies including china have been recovering at an unexpectedly high pace. in that regard, it might well be the case that those economies grow more than expected again. however, as those emerging economies are growing at a high pace, we need to be aware of the risk that the economy might overheat. since the united states and europe still suffer the after - effects of the financial crisis, there is uncertainty about the outlook for their economies. in particular, there are varying views on how the impaired assets of financial institutions and excess debts of households will be cleared. in japan, it took extremely long to resolve the impaired assets problem for financial institutions after the burst of the

the fact that, even though the economic expansion from 2002 originated from exports, there was active business fixed investment aimed at exports. moreover, through the effect of creating employment and wealth effects from rising stock prices, private consumption also increased. in that light, i believe that we should not make a simple choice between domestic and external demand, but rather we should see them as two mutually important elements for growth, including their transmission mechanisms. currently, asia is increasing its presence as the growth center of the global economy. japan has a considerable advantage that it is closely located to the area with great growth momentum. to make the most of the benefits from globalization and capture demand from the area that is growing strikingly are the shortcut for japan in gaining the energy for economic growth. there are also views that pay attention to the negative connotations of globalization, such as severe competition with overseas products and shift of production bases to overseas by business counterparts. however, income gained through globalization has been invested domestically, and as a result, it has exerted positive effects on the domestic economy, too. i believe that it is necessary not to turn away from globalization by claiming its negative aspects only, and to actually take globalization positively, actively taking its advantages. the next question is how to capture the benefits from growth in overseas economies. to that end, it is important to increase exports to growing markets, such as those in asia. in emerging economies, huge markets are being formed. from now on, as people ’ s level of income increases further, the level of products and services that people seek is also likely to rise. this is a great opportunity for japan, given its strength in relatively high - end products. it should be noted that the areas in which growth is expected are not limited to durable consumer goods and general machinery, which have been japan ’ s major exporting items, or the environment - related areas, where japan currently takes the lead in technology. for example, quality agricultural products or unique local specialties are the areas in which potential demand is great. also, while it may be difficult to conjure from the word “ exports, ” tourism, which invites foreign tourists to japan, also means exporting added value in the form of services. considering these points, i believe that the areas that are rich in tourism resources have potential for high growth. moreover, there are other channels for capturing the benefits from overseas economies. especially, profits from overseas investment are increasing substantially. if firms manage to tailor production technologies