rules and legislation that comes out of the process here in brussels, without infringing on national sovereignty. the fourth point i would make is that the eu, as well as leading the way in addressing that problem regionally, must take a very close interest in the arrangements for global resolution, because pretty well every single one of europe ’ s largest financial institutions operates on a global scale and, furthermore, the largest global institutions headquartered outside the eu all have sizable and complex businesses within the eu. in the run up to the g20 meeting of finance ministers and governors in october and then the leaders summit in november, our community and the political community will have to think about the extent to which sovereignty in this area could be pooled or whether, instead, to come up with a middle road which at least removes obstacles to co - operation. i suspect it is unrealistic at this stage of global financial development and co - operation for there to be a multilateral binding treaty that would put a single country in the sole and unqualified lead in the resolution of a global financial institution. but that doesn ’ t mean that there is nothing useful to do. we could do things along the following lines. first of all, in our national and eu legislation, we could all remove impediments for one country to co - operate with other countries in the event of a resolution. this sounds quite straightforward but actually it would be quite a step because, of course, all of us are answerable to our national parliaments. but nor do i think it is realistic for countries to engage in or embark on what one might think of as unilateral disarmament, where a country that acts as host to financial institutions says to the home countries “ i will let you lead in the resolution of all banks in all circumstances, notwithstanding whether you take account of the interests of my country ”. so countries probably need to reserve some powers for themselves but should eliminate from their regimes any automatic triggers that can cut across sensible resolution led by a firm ’ s home country. the other step that we could sensibly take, i suspect, is for there to be much closer planning on a bilateral basis between host and home countries in respect of particular banks. i mean at the level of entering into more or less binding agreements on who would do what in the event of distress. that, again, sounds easy, but actually it would be embarking on quite a change from where we are right now. and

orders for construction machinery have recently marked a large increase due to demand for restoration of disaster - stricken buildings. private consumption has been firm. although services consumption took somewhat longer to recover from the earthquake disaster, it is now picking up as evidenced by the fact that sales in the food service industry and outlays for travel have more or less returned to their pre - quake levels. exports and production continue to increase partly due to the restoration of the level of overseas inventories, which declined after the earthquake. however, the pace of their increase has become moderate due to effects of the slowdown in overseas economies. the effects of the slowdown in overseas economies are particularly apparent in exports of itrelated goods such as semiconductor manufacturing equipment. as for the outlook, for the time being, japan ’ s economy will face an adverse effect from the slowdown in overseas economies and the appreciation of the yen, as well as from the flooding in thailand. after that, the economy is expected to return to a moderate recovery path as the pace of recovery in overseas economies picks up, led by emerging and commodity - exporting economies that basically maintain their growth mechanism of domestic demand, and as reconstruction - related demand after the earthquake disaster gradually materializes. the year - on - year rate of change in the cpi ( all items less fresh food ) has recently been at around 0 percent. it will remain at around 0 percent for the time being but will gradually rise bis central bankers ’ speeches to around 0. 5 percent toward fiscal 2013, along with an improvement in the aggregate supply and demand balance. the baseline scenario for japan ’ s economy is that it will eventually return to a sustainable growth path with price stability in the longer run. there are, however, various risk factors to such a baseline scenario. needless to say, the risk factor that should cause most concern is future developments in the sovereign debt problem in europe and their effects on global financial markets and the global economy. as i have stated earlier, the debt problem has largely affected the global economy already, but it could result in weaker growth, not only in the european economy but also in the global economy, particularly through its effects on global financial markets. as global financial markets continue to be under stress, global investors have tended to be increasingly risk averse, and to purchase the yen, which is considered a relatively safe currency. while the u. s. dollar - pegged bloc expands, the yen is one of the major freefloating currencies