ueda kazuo : the bank's semiannual report on currency and monetary control statement by mr ueda kazuo, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 17 november 2023. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control every june and december. i am pleased to have this opportunity today to talk about recent economic and financial developments and about the bank's conduct of monetary policy. i. economic and financial developments i will first explain recent economic and financial developments. japan's economy has recovered moderately. exports and industrial production have been more or less flat, supported by a waning of the effects of supply - side constraints. corporate profits have been at high levels on the whole, and business sentiment has improved moderately. in this situation, business fixed investment has increased moderately. the employment and income situation has improved moderately. private consumption has increased steadily at a moderate pace, despite being affected by price rises. with regard to the outlook, japan's economy is likely to continue recovering moderately, supported by the materialization of pent - up demand, as well as by factors such as accommodative financial conditions and the government's economic measures, although it is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies. the year - on - year rate of increase in the consumer price index ( cpi ) for all items excluding fresh food is slower than a while ago, mainly due to the effects of pushing down energy prices from the government's economic measures, but it has been in the range of 2. 5 - 3. 0 percent recently owing to the effects of a pass - through to consumer prices of cost increases led by the past rise in import prices. regarding the outlook, it is likely to be above 2 percent through fiscal 2024 and then decelerate in fiscal 2025. meanwhile, through fiscal 2025, the bank expects that underlying cpi inflation will increase gradually toward achieving the price stability target of 2 percent. concerning risks to the outlook, there are extremely high uncertainties surrounding japan's economic activity and prices, including developments in overseas economic activity and prices, developments in commodity prices, and domestic firms'wage - and price - setting behavior. under these circumstances, it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on japan '

, especially for that segment of banks that finds it most difficult to tap the markets for funds. part of the challenge lies in the low profitability of banking activity and in the high cost of issuing eligible liabilities. in this scenario, it is essential that spanish institutions pay due attention to the organic generation of capital in the design of their strategy and contemplate the steps needed to be well - prepared for the future regulatory scenario and to improve their relative position in the european banking industry. another key element in the design of spanish banks ’ strategies should be to persevere with the efforts made to date to reduce non - productive assets. having regard to the figures for business in spain, the resident private sector ’ s nonperforming loans have fallen by 60 % from their end - 2013 peak. at that time, they accounted for close to €190 billion. this figure was practically €75 billion as at june 2018. in terms of the npl ratio, the early - 2014 peak was 13. 9 %. as at june 2018, the figure stood at 6. 4 %. the effort is clear to see. it is too in terms of foreclosed assets, which have fallen by almost 40 % from their 2012 peak, and stood, as at june 2018, at around €60 billion. nonetheless, the foregoing figures remain high in historical terms and dynamic management of these types of assets by banks remains necessary. they must set ambitious but credible objectives. 5 / 8 in designing these objectives, banks should bear in mind the supervisory expectations defined over the past 18 months. in particular, they should be very mindful of the guidelines the ssm published in march 2017 and the addendum thereto released in march 2018. the guidelines are predominantly qualitative. they describe measures, processes and best practices in the management of non - performing exposures, with a view to banks defining strategies that enable them to reduce the accumulated volume of such exposures. the addendum complements the guidelines and sets supervisory expectations as to the prudential provisioning levels for new non - performing exposures, considering as new those classified as such as from 1 april 2018. these expectations set a timeframe of two years for 100 % provisioning of unsecured exposures, and one of seven years for 100 % coverage of secured exposures. in this latter instance, moreover, provisioning is expected to be gradual, such that it is not left until the last year to set aside