pointed out that labor productivity in japan is lower than in other advanced economies. for example, jorgenson et al. ( 2016 ) made a comparison between japan and the united states in the levels of labor productivity, showing that productivity in japan was around 40 percent lower than in the united states in 2012. however, factors that had lowered labor productivity are now being addressed. as supply - side constraints materialize in tandem with labor shortages, firms are proactively making fixed investment aimed at saving labor and increasing production capacity as well as addressing the training of employees. firms are also streamlining inefficient business processes such as unrequested re - delivery services and late - night services where sales are low. according to the oecd, japan's labor productivity, though remaining at a low level, has recently been improving at a relatively fast pace by catching up with that of other economies ( chart 7 ). ii. factors of a more structural nature sluggish growth in wages and prices is also attributable to factors of a more structural nature. the following section will consider some examples, since these factors are also important from the viewpoint of the theme of today's session. a. labor force participation of women and the elderly in japan, where the population is rapidly aging and the birthrate is dropping sharply, the government and firms have been promoting the active participation of women and the elderly in the labor market. for example, steady progress has been made in increasing the number of nursery schools and nursing homes as well as moves to extend or abolish the mandatory retirement age ( chart 8 ). as a result, the number of women and the elderly participating in the labor force has been increasing. the aging of baby boomers has also contributed to the rise in the ratio of the elderly to the overall workforce. since wages for women and the elderly have tended thus far to be relatively low, these changes provide firms facing labor shortages with low - cost labor, thereby easing upward pressure on wages ( chart 9 ). besides, although most women used to engage in jobs with simple and routine tasks, an increasing number of talented women have shifted to more professional occupations, leading to an increase in productivity. it has been noted that the easing of labor market conditions is also brought about by the diminishing of slack in terms of quality. b. future anxiety a possible decline in long - term growth potential of the economy and anxiety over future income in anticipation, for example, of cuts

interest. needless to say, the effects of monetary policy will be determined by the difference between real interest rates and the natural rate of interest. thus, there are two ways for monetary easing to be effective : first, lower real interest rates, given that the natural rate of interest is unchanged, or, second, increase the natural rate of interest, given that real interest rates are unchanged. the bank of japan ’ s qqe seems to have started to exert effects both in terms of lowering real interest rates and an increase in the natural rate of interest. let me explain this in order. lowering real interest rates first, let me consider the effect of lowering real interest rates. when lowering real interest rates as a policy, a central bank normally lowers nominal interest rates. of course, for such policy to be taken, there should be sufficiently large room for reduction in nominal interest rates. for example, in the united states, based on the assumption that inflation expectations were anchored, it can be interpreted that real interest rates have been lowered as a result of reducing nominal interest rates. in japan, as nominal interest rates were already at low levels, there was limited room to lower real interest rates by reducing nominal interest rates. another way was needed to lower real interest rates. namely, an increase in inflation expectations. while the purpose of lowering real interest rates itself was the same as in the united states, there was a stark contrast in terms of a strategy to achieve that purpose. the bank aims to achieve the 2 percent price stability target with a time horizon of about two years and implement measures toward achieving the target, which would be effective in overcoming the policy constraints. with the implementation of the qqe, inflation expectations have actually been edging up, as i mentioned earlier, and thus the bank ’ s policy has started to exert its intended effects. bis central bankers ’ speeches an increase in the natural rate of interest as the second issue for discussion, let me consider the relationship between unconventional monetary policy and the natural rate of interest. this issue has been little discussed, and thus might be controversial to some extent. to begin with, the natural rate of interest corresponds to expected returns from firms ’ capital investment. the bank ’ s qqe aims at conquering the “ deflationary sentiment ” that has been entrenched among the public and restoring what had been the intrinsic dynamism of japan ’ s economy. as a consequence of the policy, if japan ’ s growth potential recovers