a large proportion of their population access to the most basic necessities, let alone education, health and financial services. an integrated and balanced development strategy makes several demands of the financial system. this, in turn requires a careful balancing between rapid expansion in capacity and the kinds of products and services offered on the one hand and safety and prudence on the other. this balancing act, at one level common to emes, but at another, differentiated by the vastly different conditions within the emes themselves may not be amenable to a reasonable set of common standards, except at a lowest common denominator level, which is then unlikely to serve the purpose of achieving a safe and secure global financial system. the financial safety nets issue is also one on which a distinct eme perspective may emerge. the difference in concerns between advanced and emerging economies is heightened in the current environment in which increasing liquidity in some advanced economies is driving possibly short term capital flows into emerging economies. in such a situation, self - insurance needs to be given due consideration. when economic fundamentals are sound, would reserves not constitute the most effective way of dealing with reversals in short - term capital flows? if self - insurance were done away with, reliance on external insurance mechanisms might conceivably have two negative implications. one, procedure and due diligence might take time, thereby diluting the effectiveness of the safety net. two, global investors may suspect that something is fundamentally wrong, aggravating the pressure of exit. i have used the issues of financial regulation and safety nets to illustrate my point about the balancing act that emes need to perform between addressing domestic priorities and aligning with a meaningful set of global standards or mechanisms. however, this can be taken as a more general issue for emes as they engage in global forums on a whole range of issues on which the benefits of integration have to be viewed in conjunction with the pursuit of domestic policy objectives. essentially, from the emerging market perspective, the value of the g20 process lies in how effectively it is able to accommodate this need for balance. as i have tried to argue through this presentation, both on short - term and long - term issues, the differences and divergences between countries in the group are wide and, perhaps, inevitable. this puts the group at an immediate disadvantage when it comes to addressing issues, because, given the differences, even agreeing on a common objective, let alone a common approach may be a difficult, if not impossible

, despite being affected by bad weather conditions such as typhoons. confidence indicators related to private consumption also have been picking up ( chart 5 ). based on this situation, private consumption is expected to increase moderately on the back of the continued steady improvement in the employment and income situation. b. the current situation of prices and their outlook next, i would like to touch on price developments. the year - on - year rate of change in the cpi for all items less fresh food has been slightly negative due to the effects of the decline in energy prices ( chart 6 ). meanwhile, that for all items less fresh food and energy has remained positive for exactly three years since october 2013. this is the first time since the late 1990s, when japan's economy fell into deflation, that the inflation rate has been positive for such a long period. however, it has slowed recently. this is mainly attributable to the fact that prices, such as for durable goods, have declined due to the effects of the past appreciation of the yen, and that firms'price - setting stance has become slightly cautious, reflecting weakness in private consumption in the first half of 2016. the year - on - year rate of change in the cpi for all items less fresh food is likely to be slightly negative or about 0 percent for the time being, and increase toward 2 percent in the second half of the projection period - - that is, through fiscal 2018. the following four points can be highlighted as the background to this outlook. the first point is with regard to developments in energy prices, such as crude oil prices. the downward pressure of the past decline in energy prices on the cpi is expected to dissipate going forward and the negative contribution of energy items is estimated to reach around 0 percentage point in early 2017 ( chart 7 ). therefore, the cpi for all items less fresh food - for which the year - on - year rate of change is currently minus 0. 5 percent - - is expected to reduce its rate of decline rapidly and turn positive. the second point is that, as i have explained earlier, private consumption has bottomed out recently on the back of improvement in the employment and income situation, and is expected to increase moderately. with such developments, firms'price - setting stance is expected to revert to raising prices. the third point is that labor market conditions are expected to further tighten, exerting upward pressure on wages accordingly. in this context, how the labor - management wage negotiations