pace of growth is expected to be somewhat reduced. that said, even if the chinese economy maintained its growth rate, the main contribution would likely be public investment, so the degree of effects on asian economies ’ and japan ’ s exports continues to warrant due attention. bis central bankers ’ speeches in sum, overseas economies as a whole temporarily slowed their pace of growth due to the slowdown in the u. s. and chinese economies, but are expected to continue to recover moderately, mainly in advanced economies. there are various uncertainties concerning overseas economies, such as effects of normalization of monetary policy in the united states on the global financial markets, the sovereign debt problem in greece, and developments of emerging economies including china, and close attention will continue to be paid to these issues. in light of the developments in overseas economies, japan ’ s exports and production had been increasing but are slightly lacking momentum recently ( chart 5 ). the lack of momentum in exports is temporary due to the effects of the slowdown in overseas economies for the january - march quarter appearing with a time lag ; as for production, it is due to inventory adjustments of compact cars ( with engine sizes of 660cc or less ) as well as of iron and steel, in addition to the slowing in exports. looking ahead, as overseas economies are expected to maintain their moderate recovery, mainly in advanced economies, and as it seems that inventory adjustments will be completed sooner or later with an improvement in domestic demand, exports and production are expected to increase moderately, albeit with some fluctuations. corporate sector : high profits and positive investment stance turning to japan ’ s economy, in the corporate sector, profits increased to a record high owing in part to the decline in crude oil prices and to effects of the correction of the appreciation of the yen ( chart 6 ). they are expected to continue on their solid increasing trend as sales grow accompanied by an increase in domestic and external demand. with corporate profits increasing to their highest level, firms ’ positive investment stance is maintained. real business fixed investment in the gdp statistics for the january - march quarter has increased markedly. according to the june tankan ( short - term economic survey of enterprises in japan ), firms seem to have increased their fixed investment this fiscal year, as they did last fiscal year. the plans of large manufacturing firms in particular marked a high level at this time of the year, the highest since fiscal 2004, reflecting in part an increase in domestic investment as it appears that the situation of a weaker yen

with the tightening in labor market bis central bankers ’ speeches conditions and heightening utilization of production capacity, it has improved to around 0 percent, which is the past long - term average. going forward, as the economy continues to grow at a pace above its potential, the output gap is expected to improve further into positive territory. next, as i described earlier, inflation expectations appear to be rising on the whole. in particular, the recent changes in firms ’ wage - and price - setting behavior are drawing specific attention. as for wage setting, many firms have increased their base pay for two consecutive years. moreover, their price - setting has also been shifting from a low - price strategy to raising sales prices while increasing value - added. under deflation, firms could not raise sales prices against weak demand, and thus focused on lowering costs as much as possible – including personnel expenses – in order to secure profits. however, as economic activity continues to improve, an increasing number of firms seem to be able to pass increased costs, including the rise in input prices and personnel expenses, on to sales prices. in particular, since the turn of the fiscal year in april, upward price revisions have been more widespread, which is something that has not been observed in recent years. at the meeting of general managers of the bank ’ s branches held recently, many reported in this context. these changes also can be observed in hard data ( chart 12 ). the index calculated as the number of items for which prices rose minus that of items for which prices declined – among 524 items that cpi ( all items less fresh food ) consists of – has recently risen further, and the most recent index for may 2015 is the highest since 2003. furthermore, the university of tokyo daily price index and sri - hitotsubashi consumer purchase indices, which promptly report prices of daily use items and food, turned clearly positive on a year - on - year basis in april this year, and have continued to rise to the present. compared with last year, when prices of many items rose in april with the consumption tax hike, quickly followed by the decline in prices due to weak sales, price movements this year present a clear contrast. as i have explained, qqe has been exerting its intended effects and a mechanism has been operating in which the year - on - year rate of increase in prices rises moderately, accompanied by an improvement in corporate profits and increases in employment and wages. the yearon - year rate of increase in