haruhiko kuroda : the bank ’ s semiannual report on currency and monetary control statement by mr haruhiko kuroda, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 18 february 2016. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. i am pleased to have this opportunity today to talk about developments in japan ’ s economy and present an overall review of the bank ’ s conduct of monetary policy. i. economic and financial developments in japan first, i will explain economic and financial developments in japan. japan ’ s economy has continued to recover moderately, with a virtuous cycle from income to spending operating in both the household and corporate sectors, although exports and production have been affected by the slowdown in emerging economies. looking ahead, japan ’ s economy is likely to be on a moderate expanding trend as domestic demand is likely to follow an uptrend and as exports are expected to increase moderately on the back of emerging economies moving out of their deceleration phase. on the price front, the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food is about 0 percent. the year - on - year rate of change in the cpi for all items less fresh food and energy has remained positive for 27 consecutive months and increased to 1. 3 percent recently ; this suggests that the underlying trend in inflation has been improving steadily. the year - on - year rate of change in the cpi for all items less fresh food is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices, and, as the underlying trend in inflation steadily rises – on the back of an improvement in the output gap and of an increase in medium - to long - term inflation expectations – accelerate toward the price stability target of 2 percent. assuming that crude oil prices will rise moderately from the recent level, the timing of the year - on - year rate of change in the cpi reaching around 2 percent is projected to be around the first half of fiscal 2017. ii. conduct of monetary policy as explained, the baseline scenario assumes that japan ’ s economy is likely to be on a moderate expanding trend and the year - on - year rate of change in the cpi is likely to accelerate toward 2 percent. however, from the turn of the year, global financial markets

bank of japan ’ s march report of recent economic and financial developments1 bank of japan, communication, 10 march 2000. * * * the bank ’ s view japan ’ s economy has recently started to improve. the economic environment surrounding private demand continues to improve, as seen in the increase in corporate profits. however, clear signs of a self - sustained recovery in private demand have not been observed yet. with regard to final demand, housing investment and public investment are decreasing moderately. recovery in private consumption continues to be weak through lack of notable improvements in employment and income conditions. meanwhile, business fixed investment, which had been on a downward trend, seems to have almost leveled off. net exports ( real exports minus real imports ) continue to follow an upward trend due to an upturn in overseas economies. reflecting such developments in final demand, industrial production continues to rise, and an increase in corporate profits is becoming distinct. in this situation, corporate sentiment continues to improve. regarding the employment condition, the decrease in the number of employees is slowing. however, the improvements in corporate profits and sentiment have not stimulated business activities of many firms, because these firms still strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. in addition, efforts by firms to reduce personnel expenses have prolonged the severity of households ’ income conditions. as for the outlook, public investment is likely to pick up reflecting the progress in the implementation of the supplementary budget for fiscal 1999. this, along with the favorable financial environment created partly by the bank ’ s monetary easing, is expected to continue underpinning the economy. moreover, the positive impact on domestic production of the recovery of overseas economies is likely to continue for some time, having favorable effects on corporate profits and spending, and then on household income and consumption. by contrast, it is highly probable that housing investment will continue to decline moderately. in the corporate sector, restructuring is gradually improving profitability to some extent, and some firms in high - growth sectors are inclining toward increasing capital spending. many firms, however, are expected to maintain a cautious stance toward fixed investment based on their modest prospects for sales. it seems that the appreciation of the yen since the summer of 1999 will have an adverse effect on corporate profits in the near term. in these circumstances, future economic developments still require careful monitoring in spite of the continued improvements in the environment for private demand. furthermore, it is important to promote structural reform in order to facilitate a recovery in