takehiro sato : recent economic and financial developments, and monetary policy speech by mr takehiro sato, member of the policy board of the bank of japan, at a meeting with business leaders, hakodate, 4 december 2013. * i. * * introduction on april 1, 2013, the bank of japan ’ s hakodate branch celebrated its 120th anniversary. i would like to take this opportunity to express my sincere gratitude for your long - term cooperation with the activities of the hakodate branch. in today ’ s speech, i will begin by focusing on economic and financial developments in japan and abroad, as well as the bank ’ s recent monetary policy. i will then touch briefly on the economy of southern hokkaido. following my speech, i would like to hear your views on actual conditions in the local economy and on the bank ’ s conduct of monetary policy. ii. current situation of and outlook for japan ’ s economy and the global economy a. outlook for the global economy the general outlook for the global economy had temporarily become somewhat cautious due to the instability in global financial markets toward this summer. the global economy, however, is expected to gradually improve as global financial markets as a whole have regained stability, despite still showing nervousness. specifically, with regard to the direction of u. s. monetary policy, speculation among investors about an earlier - than - expected reduction by the federal reserve in the pace of its asset purchases became heightened from around late may 2013. this triggered instability in global financial markets, as evidenced by the simultaneous declines in stock prices, bond prices, and in the value of currencies in some emerging economies. the forecast for global economic growth presented in the world economic outlook released by the international monetary fund ( imf ), which had continued to be revised downward in the recent past, was revised further downward in october, mainly for emerging economies ( chart 1 ). this revision to the global economic forecast was mainly due to the revisions made to the outlook for emerging economies while that for advanced economies as a whole was left unchanged, and this seems to have certain implications for the outlook for the global economy, mainly in terms of risk factors. more specifically, the u. s. economy is on a recovery path, albeit at a moderate pace, against the background of progress in households ’ balance - sheet adjustments and an improvement in the housing market. the european economy is starting to pick up against the backdrop of the amendments in the fiscal austerity policy and the bottoming

illegal means or criminal activity was used freely without any restriction. but, today the situation is completely different. today, emerging countries are acting in a much more responsible manner in driving their economies forward. in fact, the present day emerging economies are achieving their attractive levels of growth, while adhering to, and respecting international conventions on copyright, anti - money laundering and terrorist financing, environmental, labour, human rights, safety, health, etc., etc. this situation is sometimes forgotten by some of the economic and political analysts, particularly from advanced nations and therefore it may not be too inappropriate to remind the world of this state of affairs, on and off. all in all, from the point of view of individual developing countries, the most important economic need at present is to maintain the high economic growth momentum that they are currently achieving, in a sustainable manner. although it had been tough, it is heartening to note that many developing countries have, since of late, been able to do so. but the challenge is becoming more and more intense by the day, and policymakers have to be constantly alert to developments on several fronts simultaneously, in order to continue with the same momentum. investments have to be boosted ; institutions need to be strengthened ; infrastructure has to be improved ; regulation has to be strengthened. in addition, all this has to happen at the same time. in the meantime, global challenges and risks loom large. some of the downside risks are so intense and serious that those could even threaten the very foundation of the present growth momentum, and drag the developing nations as well as the entire world economy towards recession! there are many such dangers lurking. the current financial market turmoil could trigger a more pronounced global slowdown. the unbelievably high and volatile oil prices and the resulting inflationary pressures could lead to severe bop problems, disrupt capital inflows and cause large global imbalances. the aging population, the intensification of resistance to globalization, the havoc that may be caused by global warming and the danger of terrorism could all lead to serious repercussions to the sustainable growth models that the economic planners are attempting to implement. but the good news is that there is sufficient evidence to indicate to us, that many developing countries are implementing a number of structural changes order to face upto these growing threats. improved monetary and fiscal policies, improved institutions, and better financial systems, etc., are clearly helping to stretch the current positive business cycle, notwithstanding the numerous threats