masaaki shirakawa : recent developments in japana€™s economy and the conduct of monetary policy statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank's semiannual report on currency and monetary control, before the committee on financial affairs, house of representatives, tokyo, 13 march 2009. * * * introduction i am pleased to have this opportunity to present an overall review of the bank of japan's conduct of monetary policy. the bank submitted to the diet its semiannual report on currency and monetary control for the second half of fiscal 2007 on june 10, 2008 and that for the first half of fiscal 2008 on december 12, 2008. today i would like to talk about recent developments in japan's economy and the conduct of monetary policy. i. developments in japan's economy japan's exports have been decreasing substantially reflecting a slowdown in overseas economies, and domestic demand has become weaker against the background of declining corporate profits and the worsening employment and income situation in the household sector. financial conditions have remained tight, as shown by, for example, a continued increase in the number of firms, especially small firms, reporting that their financial positions are weak and lending attitudes of financial institutions are severe. under these circumstances, economic conditions have deteriorated significantly and are likely to continue deteriorating for the time being. on the price front, domestic corporate goods prices have been decreasing, mainly due to the drop in international commodity prices. the year - on - year rate of increase in the cpi ( excluding fresh food ) has recently moderated reflecting the declines in the prices of petroleum products and the stabilization of food prices, and, with increasing slackness evident in supply and demand conditions, will likely become negative in the future. there are risks to the outlook for economic activity and prices. much depends on global financial conditions as well as developments in overseas economies, and particular attention will need to be paid to the downside risks to economic activity. in addition, there is the risk of a further weakening in domestic private demand if firms'medium - to long - term growth expectations decline and pressures to adjust capital stock and employment increase. if financial conditions should tighten further, pressures acting to depress economic activity from the financial side might become more marked and the adverse feedback loop between financial and economic activity might intensify. turning to prices, there is a possibility that the inflation rate will decline further if downside risks to economic activity materialize or commodity prices

and those who are part time. see bank of england, “ inflation report, ” august 2013. see, for example, andrew haldane, “ targeting inflation : the united kingdom in retrospect, ” in mario i. blejerer et al., eds. inflation targeting in practice, which contains summaries of presentations made at the imf seminar held in rio de janeiro, brazil on may 3 – 5, 1999. bis central bankers ’ speeches more specifically, i find it important to look at the year - on - year rate of change in monthly cash earnings for full - time workers, and that in hourly cash earnings for part - time workers. 8 these indicators show that hourly cash earnings for part - time workers have been on a rising trend over the past three years, reflecting the high level of the active job openings - to - applicants ratio ( chart 12 ). there is a sign that supply and demand conditions in the labor market have been tightening, particularly for part - time workers. in addition, the growth rate of monthly cash earnings for full - time workers has been positive in recent months, thanks to increases in bonuses and overtime payments. the unemployment rate was 4 percent in september 2013 ( 4. 3 percent for males and 3. 5 percent for females ), approaching the full - employment level especially with regard to female workers. the bank ’ s september 2013 tankan ( short - term economic survey of enterprises in japan ) indicates a shortage in employment in the nonmanufacturing sector, regardless of firm size. given these conditions and demographic changes, an increase in hourly cash earnings for part - time workers is expected to continue. this may help narrow the wage differences between part - time and full - time workers – although progress is likely to occur only gradually. it is conceptually apparent that these conditions may contribute to mitigating the negative wage gap mentioned earlier. if the negative wage gap shrinks and the increasing trend in wages becomes firm, as the third conceptual channel, this may eventually exert greater pressure on firms to raise their sales prices. c. conceptual channels leading to a steepening in the slope of the phillips curve this subsection will focus on the conceptual channels that may help steepen the slope of the phillips curve. current economic conditions appear to exhibit signs of a gradual steepening in the slope of the phillips curve, although their sustainability is not yet clear. will firms ’ profit margins improve? recently, it has been noted that the environment surrounding