as well as the sharp decline in global demand resulting from the financial crisis. therefore, in view of the current economic outlook that the recovery will be sluggish, demand – which is well short of supply at present – is unlikely to recover quickly, and the downward pressure on prices will not ease in the short term. the bank ’ s current policy measures have been helping to underpin demand, by encouraging money market rates to decline and by providing ample liquidity to financial institutions. fiscal measures have also been taken to stimulate demand for consumer durables. further restructuring efforts in the private sector are necessary to achieve sustained growth in demand. in other words, it is vital that the bank, the government, and the private sector each play their part and jointly work to boost demand. the frequently voiced opinion that, to end deflation, the bank should provide massive amounts of liquidity to private financial institutions as a quick fix to overcome the situation, ignores longer - term issues that have major implications for the future. looking back at the bank ’ s quantitative easing policy implemented from 2001 to 2006, the bank provided ample liquidity to financial institutions via their current accounts held at the bank, but private banks ’ lending to other private sector entities did not rise relative to the increase in the outstanding balance of current account deposits, indicating that the policy ’ s direct impact on ending deflation was small. recently, the bank ’ s accommodative stance on money market operations has enhanced the sense of an abundance of liquidity, causing market rates, including those on longer - term instruments, to decline further toward 0. 1 percent, which is the rate applied to the complementary deposit facility. nevertheless, due to weak corporate demand for funds, the bank ’ s ample supply of funds once more has failed to lead to an increase in bank lending, although financial institutions have not been averse to lending. in sum, the ordinary operation of the transmission mechanism of monetary easing has not been working. based on this observation, i believe that japan will not be able to end deflation via policy measures such as simply increasing the supply of liquidity. in addition to the bank ’ s contribution to price stability, it is essential that all economic entities work together to create demand at home and abroad through innovation and steady day - to - day efforts, to ensure, and attain the prospect of, higher income over the medium - to long - term through increased productivity. c. announcement of the “ understanding of medium - to long -

to the biggest corporate and consumer market in the world. this naturally increases the demand for services in the region as well. equally important is coordination on cross - border regulatory and institutional elements within the region. discussions in asean's economic community blueprint 20255 could provide hints on how to address such cross - border issues. for example, the business community has in the past raised issues regarding the differing requirements and regulations among asean countries with incomplete mutual recognition agreements, and the burdensome processes and inadequate transparency in some member countries. although substantial progress has been made, differences among members remain in terms of ease of doing business and trading across borders. these challenges are noted in other asian countries as well. while the eu has been aiming for economic integration through the establishment of a single market, asian countries, such as the members of asean, have preferred to preserve each country's sovereignty. this is certainly appropriate, reflecting the region's diversity. having said that, as regional economies become more dependent on each other, more work is necessary to reduce barriers to free trade of goods and services and for direct investment. this would boost intraregional demand as a source of growth. it is also essential to work jointly in developing deep and liquid financial markets to enhance the effective use of regional savings and to invite long - term capital inflows. as a basis for further strengthening such economic ties, it is also important to patiently strive to deepen fundamental mutual understanding among countries and people in the region. as i mentioned earlier, asian countries are highly diverse not only in economic aspects such as income, industrial structure and technological progress, but also in many other fields such as religion and culture. for this reason, it is important to foster a stronger sense of trust while respecting each other's unique characteristics. 5 asean's economic community ( aec ) blueprint 2025 enlists concrete actions to be taken by 2025 in order to realize the aec envisaged in asean's community vision 2025. engaging with the global community asia must also actively engage in global discussions beyond pure economic issues. for example, according to research by a consulting firm comparing the soft power of different countries, only four countries from asia are in the top 30, 6 as shown in chart 4. with around 60 % of the global population, asia has a responsibility to play a constructive role in global issues such as climate change and inequality. through effective dialogue, ideas and values originating in asia could provide a positive impetus to the global