bank of japan ’ s november report of recent economic and financial developments1 bank of japan, communication 15 november 1999. * * * the bank ’ s view2 japan ’ s economy, which had stopped deteriorating, is currently turning to improve, with exports and production increasing. however, clear signs of a self - sustained recovery in private demand have not yet been observed. with regard to final demand, business fixed investment has been on a downward trend, although the pace of its decline is slowing. recovery in private consumption continues to be weak through lack of notable improvements in employment and income conditions. housing investment has recently peaked out, and public investment seems to have stopped rising. meanwhile, net exports ( real exports minus real imports ) have increased further due to an upturn in overseas economies. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production is increasing. additionally, corporate profits have started picking up. in this situation, corporate sentiment continues to improve. regarding the employment condition, there are some indicators that suggest a slowdown of the decrease in the number of employees. the positive developments in corporate profits and sentiment, however, have not necessarily stimulated business activities, because firms still strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. in addition, efforts by firms to reduce personnel expenses have prolonged the severity of households ’ income conditions. as for the outlook, improvements in the overall financial environment partly due to the monetary easing by the bank, along with a series of economic measures taken by the government including those announced recently, are expected to continue underpinning the economy. moreover, the positive impact on domestic production of the recovery of overseas economies, especially of asian economies, is likely to continue for some time. by contrast, it is highly probable that housing investment will remain flat for the time being. in addition, under cautious sales outlook, firms are expected to continue corporate restructuring to improve their profitability. such restructuring is unavoidable to enhance medium - term growth of the corporate sector and thereby that of the overall economy. in the short run, however, it reduces fixed investment, and also delays an improvement in employment and income conditions, thereby discouraging household expenditure. moreover, it seems that the recent appreciation of the yen will have an adverse effect on corporate profits in the near term. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand, even though an upturn in economic activities

, known as scope 3 emissions. in many sectors, this is crucial for understanding a company ’ s climate risk. we will also work on other climate - related issues where we believe international standards may be useful. one example is the use of emission allowances. our work with companies begins with setting clear expectations. we have formulated our expectations in a set of expectation documents. when it comes to climate change, we already expect companies to have a climate strategy, set emission targets, report on progress, and stress - test their business models against various climate scenarios. in future, it will be natural for us to emphasise towards a net zero emission horizon. this will give clearer direction to our ownership activities. exercising ownership active ownership will play a key part in work on addressing the fund ’ s climate risk. a dialogue with companies will be particularly important. chart : climate increasingly a dialogue topic our dialogue with companies reflects our expectations. last year, we held around 3, 000 meetings with companies. as you can see from the chart, sustainability is increasingly on the agenda. 3 / 6 bis central bankers'speeches we plan to increase both the breadth and the depth of our climate - related ownership activities. we will give particular priority to the highest - emitting companies and companies that have not published climate plans or have inadequate climate reporting. we will also step up our ownership activities aimed at the financial sector, which is exposed indirectly to climate risk through loans and investments. we tailor our dialogue to the sector and the situation. steel and cement are good examples. these companies currently have high emissions, but their products will still be needed in the lowcarbon economy. much of our dialogue on transition plans is therefore about the technological advances and investments needed. we also raise the need for industry standards and the issue of lobbying, which is a major challenge. chart : companies ’ climate reporting is improving we are seeing signs that our efforts are paying off. for example, when we analysed the reporting of 1, 500 companies, we found that those we have actively engaged with have made more progress in their reporting on climate strategy than the other companies. of course, we cannot claim all the credit for this progress. but progress it is. in future, we will provide more information on our dialogue with companies – what we talk about and the changes we see. drawing attention to it is a tool in itself. reporting and voting our dialogue with companies will not have the desired result in every case. we can then hold boards to account