made the difference to the time scale and acceleration? innovations and structural changes over the last two decades have no doubt played an important role, namely globalization, advances in information communication technology, and financial innovations and sophistication. indeed, compared with japan in the 1990s, the current crisis is far more complex, interconnected and global. accordingly, the velocity of market dysfunction has been much faster and its contagion much more widespread than in japan ’ s case, and the damage inflicted on the global financial system and economy has been far more devastating than japan ’ s non - performing loan problem. 2. lesson two the second lesson we have learned from the crises is that once an adverse feedback loop has been started, it is extremely difficult and costly to stop it and to restore confidence. this was the essence of japan ’ s experience ; a series of fiscal stimulus packages and an accommodative monetary policy could not generate sustained economic growth, as the financial system was severely impaired and market confidence continued to be eroded. injections of public capital in 1998 and 1999 were also, in retrospect, not sufficient to convince the market to jump - start the economy. this is evident in chart 2. at the same time, it was clear that the japanese economy was suffering from a significant productivity slowdown from its peak in the 1980s. so when and how did japan ’ s adverse feedback loop stop? with hindsight, perhaps the turning point was october 2002, when the financial services agency urged major banks to halve their npl ratios by the end of march 2005, and pledged to monitor their efforts continuously and rigorously. the bank of japan also urged banks to carry out more rigorous evaluations of npls, and to dispose of them promptly based on those evaluations. in retrospect, the timing coincided with the reflection point at which the economy had just passed the trough of the 2001 recession, and began to recover, thanks to strong export demand due to the vigorous world economy. this was also the time when substantial progress was being made in corporate restructuring with respect to the so - called “ three excesses ” : debt, employment and production capacity. this restructuring helped the final pick up. in this way, the japanese economy was, in general, out of the woods around 2005, although some regional economies lagged behind, having benefited less from the global growth. 3. lesson three i will move on to the third lesson and ask the following question : “ is it possible to solve

yukitoshi funo : economic activity and prices in japan, and monetary policy in japan speech by mr yukitoshi funo, member of the policy board of the bank of japan, at a meeting with business leaders, miyagi, 21 june 2018. * * * i. recent economic and price developments a. overseas developments i would like to begin my speech by talking about overseas economies. the business sentiment of manufacturing firms on a global basis has maintained its improving trend, and the world trade volume has continued to recover. in this situation, overseas economies have continued to grow firmly on the whole. in terms of the outlook, overseas economies are expected to continue growing firmly. according to the world economic outlook, released in april 2018 by the international monetary fund ( imf ), the global growth rate is projected to be 3. 9 percent in both 2018 and 2019. looking at developments by major region, the u. s. economy has been expanding and the european economy has continued to recover. the chinese economy has continued to see stable growth on the whole. other emerging economies and commodity - exporting economies have been recovering moderately on the whole, reflecting in particular an increase in exports and the effects of those economies ’ stimulus measures. as for the outlook, the u. s. economy is expected to keep expanding and the european economy is projected to continue recovering. the chinese economy is likely to broadly follow a stable growth path as authorities conduct fiscal and monetary policy in a timely manner. other emerging economies and commodity - exporting economies are likely to continue their moderate recovery on the whole. risk factors to the overseas economic outlook are wide ranging, as exemplified by ( 1 ) the u. s. economic policies and their impact on global financial markets, ( 2 ) developments in emerging and commodity - exporting economies, ( 3 ) negotiations on the united kingdom ’ s exit from the european union ( eu ) and their effects, and ( 4 ) geopolitical risks. in addition, uncertainty is high regarding future developments in trade policies worldwide, and therefore these developments warrant attention. i hold the view that it is important to stay vigilant regarding these risk factors, especially now that overseas economies are continuing to grow firmly. b. japan ’ s economy and prices 1. economic activity i will now discuss the economic situation in japan. japan ’ s economy is expanding moderately, with a virtuous cycle from income to spending operating. the real gdp growth rate continued to represent positive growth for eight consecutive quarters on