is sustainable without inflation. in a situation where the anchor of inflation expectations has been lost, i believe that to achieve the 2 percent price stability target and maintain the target price level in a stable manner, it is important not only to enhance monetary easing, but also to further strengthen the coordination of fiscal and monetary policy - - that is, a " policy mix. " current situation where the observed inflation rate is still evidently far from the 2 percent price stability target, it is important to make a preemptive policy response, not after confirming changes in the inflation rate which is a lagging indicator of economic conditions. the bank will continue to make efforts toward overcoming deflation completely. iii. changes in japan's labor market next, i would like to talk about japan's labor market. as shown in chart 17, japan's unemployment rate continued to rise throughout the 1990s and until 2002, when it marked 5. 5 percent ; it then declined to the 3 percent level but rose again following the failure of lehman brothers, and has dropped to the range of 2. 0 - 2. 5 percent recently. 5 despite such improvement in labor market conditions, the growth in wages and prices has been sluggish. as the background to this, various factors have been cited ; for example, low wages of the " employment ice - age " generation, possible effects of the upward wage rigidity, the increasing share of part - time employees, and subdued demands by labor unions for wage increases. 6 some of these factors are based on the assumption that labor market conditions already have been tight. i now would like to review to explain the rise in the unemployment rate since the 1990s, researchers have conducted factor decomposition, concluded that a shortage in demand and structural changes in the labor market contributed to the rise, and then estimated the contribution. my estimation of the structural unemployment rate that measures structural changes in the labor market was in the range of 2. 5 - 3. 0 percent, as in kataoka goushi, " kozo shitsugyo ritsu suitei hoho no ayamari, " chap. 11 in abenomikusu wa shinkasuru : kin'yu ganseki riron o tou, ed. harada yutaka, kataoka goushi, and yoshimatsu takashi ( tokyo : chuokeizai - sha, 2017 ). recently, however, while the unemployment rate remains in the range of 2. 0 - 2. 5

. 1 - 0. 7 - 1. 3 - 0. 7 - 0. 2 - 0. 2 - 1. 7 - 0. 8 - 0. 3 - 0. 3 0. 1 0. 0 - 0. 1 0. 2 - 0. 4 - 0. 1 - 0. 3 0. 2 - 0. 7 0. 4 note : for india, figures are presented on a fiscal year basis. source : imf, “ world economic outlook ( july 2019, april 2018 ). ” chart 2 global pmi di, % pts. global manufacturing pmi output index global services pmi business activity index cy 2012 13 19 19 note : figures are from the j. p. morgan global pmi. figures above 50 indicate improvement and below 50 show deterioration on a month - on - month basis. source : ihs markit ( © and database right ihs markit ltd 2019. all rights reserved. ) chart 3 global production and economic policy uncertainty y / y % chg. average from 1997 to 2015 = 100 global economic policy uncertainty index ( right scale ) world industrial production ( excl. constructions ) uncertainty intensifies - 5 - 10 - 15 cy 05 notes : 1. world industrial production is a weighted average of industrial production volume for each country. the latest figure is as of june 2019. 2. global economic policy uncertainty index is a gdp - weighted average for 20 major countries including the united states, china, japan, and european countries. the latest figure is as of july 2019. sources : economic policy uncertainty, " global economic policy uncertainty index " ; cpb netherlands bureau for economic policy analysis, " industrial production volume, cpb world trade monitor. " effects of the u. s. - china trade friction ( estimates by the imf ) impact on real gdp of the u. s. and china chart 4 impact on global real gdp notes : 1. the left - hand graph indicates the marginal ( i. e. additional ) impact on the level of gdp from the announced and envisaged tariffs between the united states and china. the figures are the deviations from baseline projections in percentage terms. announced tariffs correspond to an increase in tariffs from 10 percent to 25 percent on usd 200 billion of u. s. imports from china as of may 2019. envisaged tariffs are the possible 25 percent tariff on the roughly usd 267 billion of u. s. imports from china. the simulations assume retaliation by china. 2. the