haruhiko kuroda : recent developments in japan ’ s economy, and observations on the european situation given japan ’ s experience during the 1990s financial crisis remarks by mr haruhiko kuroda, governor of the bank of japan, at the paris europlace financial forum, tokyo, 25 november 2013. * * * introduction i am honored to have this opportunity to speak before the paris europlace financial forum today. in the following few minutes, after briefly touching on the recent developments in japan ’ s economy, i would like to go over what we can say about the european authorities ’ various initiatives from our experience of japan ’ s financial crisis in the 1990s, bearing in mind the recent european situation. the developments in japan ’ s economy and prices i would like to start off with the recent developments in japan ’ s economic activity and prices. the bank of japan introduced quantitative and qualitative monetary easing ( qqe ) in april this year with a view to bringing japan ’ s economy out of deflation, which has lasted for nearly 15 years. in the subsequent eight months, the bank has been steadily pursuing this policy. positive developments have been spreading in financial markets and the real economy, as well as in people ’ s mindset and expectations. the qqe has steadily been exerting its intended effects. japan ’ s economy is recovering moderately, with a positive spillover from income to expenditure in the household and corporate sectors taking course. looking ahead, a virtuous circle among production, income, and spending is expected to continue, and japan ’ s economy is projected to grow, as a trend, at a pace above its potential. on the price front, the year - on - year rate of increase in the consumer price index ( cpi ) for all items less fresh food has recently been accelerating to a range between 0. 5 and 1. 0 percent. with the prospect of an improvement in the aggregate supply and demand balance and a rise in medium - to long - term inflation expectations, the year - on - year rate of change in the cpi is likely to follow a rising trend. therefore, japan ’ s economy has been following a path toward achieving the 2 percent price stability target as expected. european situation now, let me briefly refer to the european situation. while details will be provided by governor noyer, our recognition is that the european economy is bottoming out and there are signs of a pick - up. as a recovery in the european economy is

- july 1998 reflecting growing anticipation for permanent tax cut. however, they have declined since then as a wait - and - see posture has prevailed among market participants with the growing attention to the concrete measures of the new administration ’ s economic policies. meanwhile, euro - yen interest rates and the japan premium indicate strong market concerns regarding credit risks of financial institutions and liquidity risks at end - september 1998, the end of the first half of fiscal 1998. with respect to monetary aggregates, growth in m2 + cds has been slowing, reflecting the sluggish private bank lending. these developments basically reflect the further decline in the credit demand of private firms with the worsening of overall economic activities, along with the continued cautious lending stance of private banks. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on august 11, as the basis of monetary policy decisions. the rise in medical service charges due to the medical insurance system reform of september 1997. meanwhile, some firms, especially small and medium - sized firms, have been facing difficult financing conditions in terms of both funds availability and fund - raising costs. this influence on the overall economy continues to warrant careful monitoring.