the japanese economy by maintaining the current easy stance on monetary policy ; and ( 2 ) continue to supply sufficient liquidity to ensure the stability of the financial system. the fundamental problem confronting the japanese economy is not a shortage of liquidity, but a shortage of capital and reluctance to take the risks that would help economic expansion. the cure for these, as i have stated many times, is firstly to strengthen the capital base of financial institutions and restore their financial intermediary functions, and secondly to act promptly to create in the capital market an environment that makes it easier for investors to take risks. as an essential first step toward improvement in these two areas, household and business confidence must be restored. in the currency field, january will see the debut of the “ euro ”. as a result, the world will have three major currency areas — — those of the dollar, the euro, and the yen — — each backed by its own giant economic sphere. overcoming the aforementioned problems is a prerequisite to making the yen more usable and reliable internationally, enhancing its integrity. this is an extremely important step in accomplishing further development of the japanese economy by utilizing the world ’ s capital and innovative management techniques. to repeat, the priorities in 1999 will be to rebuild japan ’ s economy and financial system, and thereby lay the foundation for a globally credible yen. the bank of japan is determined to support these efforts through its monetary policy and financial system policy. * * *

march 6, 2017 bank of japan economic and financial developments and monetary policy in japan speech at a seminar hosted by the embassy of japan in switzerland ( zurich ) takako masai member of the policy board introduction it is a great honor to have the opportunity today to be invited to this seminar hosted by the embassy of japan in switzerland, and to exchange views with such a distinguished gathering of people representing the economic and financial communities in switzerland. today, i will first touch on economic and financial developments in japan. after that, i would like to explain the bank of japan's monetary policy and then share my views on the challenges and future for the economy. i. economic and financial developments in japan i will start by presenting my overview of the current economic and financial situation in japan, in order to provide a broad picture. then, i will give a summary of the latest outlook for economic activity and prices, or the outlook report, published in january 2017. the outlook report presents the bank's assessment of the current situation and the outlook for economic activity and prices, and is published quarterly. a. my overview of economic and financial developments 1. household sector favorable employment situation and household sentiment the current situation for japan's economy is characterized by tight labor market conditions. the average unemployment rate for 2016 declined to 3. 1 percent, a level close to so - called full employment. the active job openings - to - applicants ratio for 2016 rose to about 1. 4 times on average, which is the highest level in 25 years. it has risen, for example, not only in metropolitan areas but also in all other regions ( chart 1 ). i believe that such a favorable employment situation undoubtedly has supported household sentiment. individuals can feel great confidence when they do not need to be concerned about whether their wages will be cut, even if corporate performance underperforms to some extent, or whether they can find another job. this sense of reassurance is crucial in japan, where the mobility in the labor market is said to be relatively lower than in other countries. such improvement in household sentiment can be seen, for instance, in the remarkable improvement in the nippon research institute ( nri ) consumer sentiment index, which measures the outlook among consumers for financial conditions over the next one year from now. looking back at 2016, japan's economy continually faced several destabilizing factors, such as the turbulence in global financial markets from early in the year and situations at home - - namely, the kumamoto