bank of japan ’ s may review of monetary and economic trends in japan bank of japan, monthly economic review, 20 / 5 / 97. japan ’ s economy continues on a moderate recovery trend despite some fluctuations caused by the rise in the consumption tax rate, with private demand showing underlying firmness. with respect to final demand, public - sector investment has decreased, and housing investment has declined, reflecting the reversal in the stepped - up demand which took place ahead of the rise in the consumption tax rate. however, net exports have continued to rise and business fixed investment is increasing steadily. despite the reversal in the stepped - up demand caused by the consumption tax rate hike, the recovery in personal consumption has not been hindered, given the moderate but firm recovery in labor market conditions and income formation. in these circumstances, industrial production has been firm to recover the level of inventories which declined owing to the temporary surge in demand ahead of the rise in the consumption tax rate. meanwhile, prices have stopped declining, and growth in monetary aggregates has continued at around 3. 0 per cent. with regard to personal consumption, outlays for travel have continued to increase moderately. with respect to goods, sales particularly in expensive goods surged in march 1997 ahead of the rise in the consumption tax rate, followed by a decline in april as its reaction. passenger - car sales recorded buoyant two - digit growth year - to - year for six consecutive months between october 1996 and march 1997, but showed a two - digit decline year - to - year in april. although sales of electrical appliances, as well as sales at department stores and supermarkets, rose significantly in march 1997, april figures available for department stores in tokyo are significantly below the previous year ’ s level. however, the recovery trend in personal consumption do not seem to have been hindered, as labor market conditions as well as household income formation are improving steadily, albeit moderately. among leading indicators of business fixed investment, machinery orders have increased steadily. construction floor area has also continued to recover moderately. with respect to housing investment, housing starts in terms of the seasonally - adjusted annual rate reached a significantly high level in the fourth quarter 1996, partly reflecting the stepped - up demand ahead of the rise in the consumption tax rate. later, they declined as the surge in demand reversed. regarding public - sector investment, the amount of public works contracted has quite recently picked up somewhat, reflecting orders included in the supplementary budget for fiscal 1996. however, public - sector

banks have opened branches. 10. one of the more recent reforms is the licensing of credit reference bureaus. the credit information sharing mechanism is now fully operational and as a result we expect to subsequently see a reduction in costs as banks pass the resultant benefits to their customers. 11. as a researcher, i would like at some point in future when doing my economic analyses on the kenyan economy, to find a very significant “ obama effect ” on kenya ’ s growth and development. that “ obama effect ” together with a renewed political leadership able to undertake political and social reforms supported by a superior law – the constitution – will be noticed in our econometric studies in future. but this will only be realised if all of you in this room and elsewhere scale - up your investments in kenya. finally, distinguished guests, ladies and gentlemen, i conclude by wishing you fruitful discussions. thank you.