toshihiko fukui : economic situation in japan and abroad summary of a speech by mr toshihiko fukui, governor of the bank of japan, at a meeting in osaka, 2 september 2004. * * * today i will discuss the economic situation at home and abroad, and the conduct of monetary policy. amid the continued expansion of the world economy, japan ’ s economy has been on a recovery path since the summer of last year. the recovery has been initially driven in large part by an increase in exports. in addition to the favorable external conditions, the foundation has been laid domestically for a self - sustaining recovery. we should also note that the current recovery has been achieved while prices have been on a declining trend. world economy and japan ’ s economy let me start with the world economy. the economies of numerous countries including japan have become closely interrelated as globalization has progressed. this is evidenced by the growing prevalence of the international division of production processes. for example, it - related investment has been undertaken all over the world, led by the united states. high - value - added components of itrelated goods are being produced in japan, while processing and assembly have been concentrated in other east asian countries. overseas economies, particularly the united states and china, continue to expand. the u. s. economy has been maintaining expansionary momentum with a steady increase in capital spending and a large jump in corporate profits, despite several weak economic indicators. the federal reserve board raised its target federal funds rate by 25 basis points in june and august, respectively. the east asian economies have been growing steadily, with china likely to continue its high growth. in japan, real gdp growth slowed to an annual rate of 1. 7 percent in the second quarter, following high growth in the two preceding quarters. nevertheless, it is our overall judgment that japan ’ s economy has been in a recovery process, leading to a return to a sustainable growth path in light of the background i have just described. a rise in exports has raised industrial production and corporate profits, which in turn generates an expansion in business fixed investment. in the labor market, the number of employees has been increasing. japan ’ s economy is thus expected to continue recovering, gathering stronger momentum. the positive effects of the increases in production and corporate profits on household income are expected to become visible, laying stronger foundations for a gradual recovery in private consumption. corporate sector it is accurate to say that japan ’ s current recovery is due to the better

, believing that such a relationship will not interfere with the central bank ’ s autonomy. iv. conclusion i hope that i have been able to make clear how specifically the two main principles of the new bank of japan law, independence and transparency, will be embedded in the new central bank system. as i stated at the outset, the bank intends to implement all possible measures as part of the bank ’ s self - reform even before the new law is effected, to accommodate the aims of the new law. the bank is currently studying a concrete mechanism for holding regular policy board meetings on monetary control matters and for disclosing the summaries of discussions at those meetings, which will be implemented as soon as preparations are completed. i wish to conclude by asking for your continued understanding and support.