the past five years in the us, nearly a half can be attributed to an increase in service - related industries, reflecting the rapid growth of it. of this seven million increase, three million was seen in such areas as software design and the provision of temporary staff. as such examples typically illustrate, structural adjustment does not stop at referring to management reform at an individual firm level, but can be regarded as a process through which production factors such as labor, capital, and land are shifted to more efficient fields. second, technological advancement has much broader implications than the mere expansion of highproductivity sectors and substantial increase in employment. the essence of the it revolution is that it triggers a rise in productivity of the economy as a whole, while at the same time inducing profound changes in various entities including corporations and governments. for example, chairman greenspan of the us federal reserve has repeatedly taken up the subject in his speeches. the it revolution is enabling companies to grasp their production lines and consumer needs on a real - time basis. moreover, it also makes it possible for them to slash precautionary buffers such as inventories, funds, and workers, a point chairman greenspan emphasizes when discussing the benefits of the it revolution. in short, the improved efficiency of information processing has reduced uncertainties for corporate management, thereby enabling the transfer of resources to more productive uses. this, in his view, is the main benefit of enhanced productivity at the macro level created by the it revolution. in japan, discussions are likely to mainly focus on the past development and performance of individual it - related companies, although there are also various new directions being seen. for instance, some companies are introducing so - called'supply chain management'aiming at centrally controlling all planning, procurement, production, distribution, and sales not only for themselves but also for their clients. it will be interesting to see how this new system, just one example of recent new directions, will evolve. this reminds me of what j. schumpeter, a great academic economist, wrote. he saw the process of economic development as'creative destruction.'as a driving force for economic development, he propounded a movement which he called'new combination,'which comprises five elements : new products, new production methods, new markets, new resources, and new organizations. to borrow his terminology, the most visible changes which we are currently witnessing in japan are in the field of'new products,'though such signs of change are also

masaru hayami : challenges for japan's economy - the central bank's perspective speech given by mr masaru hayami, governor of the bank of japan, at the keizai club on 22 december 2000. * * * introduction we have just a week or so to go until the end of the year. i would like to present my own thinking on what has been achieved over the past year and what remains to be done. at the same time, i would also like to explain our basic stance regarding the conduct of monetary policy in order to deepen your understanding in this respect. 1. three features of the current economic recovery economic developments this year economic developments this year the first thing to be emphasized is that japan has finally reached a stage where there are emerging signs of an economic recovery. at the beginning of this month, gdp statistics based on a new calculation method ( sna93 ) were released. gdp growth on this new basis was - 0. 6 % for fiscal 1998 but turned positive in fiscal 1999 ( + 1. 4 % ) and the corresponding figure for the third quarter of this year stands at + 1. 5 %. what should be noted in this connection is how private demand and public investment have contributed to this recovery trend. when the bank of japan adopted the zero interest rate policy around two years ago, public investment for the first quarter of 1999 increased ( + 13. 3 % ) compared with the previous year. in contrast, private demand such as household consumption and business investment declined ( - 2. 0 % ) in the same period. however, this contrast has been gradually reversed during the last two years. in the third quarter of this year, public investment decreased ( - 4. 1 % ) on a year - on - year basis while private demand grew ( + 1. 1 % ). in other words, the gradual upturn in private demand is strengthening while the fiscal stimulus has turned negative. under these conditions, corporate profits as a whole are expected to record a double - digit increase for the second consecutive year. at the same time, employment and household income conditions are slowly improving, as demonstrated by the positive growth of wages since this spring and a slight decrease in the unemployment rate from its all - time high. some of you might not feel comfortable with my diagnosis of the present economic situation and we are fully aware that such a perception does exist. in our opinion, this perception typically reflects the very characteristics of the ongoing recovery phase.'polarization '