Toward the Early Achievement of fthe 2Percent Price Stability Target and Sustainable Growth of Japan's Economy

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1 Toward the Early Achievement of fthe Percent Price Stability Target and Sustainable Growth of Japan's Economy Speech at the Keizai Doyukai (Japan Association of Corporate Executives) Members' Meeting in Tokyo June, Haruhiko Kuroda Governor of the Bank of Japan Outlook for Economic Activity and Prices (as of April ) Chart Fiscal (Actual) Forecasts made in January Real GDP CPI (all items less fresh food) Excluding the effects of the consumption tax hikes Fiscal Forecasts made in January Fiscal Forecasts made in January Fiscal Note: Figures indicate the median of the Policy Board members' forecasts (point estimates). Source: Bank of Japan.

2 s.a., CY = Exports Chart 9 8 Real exports 7 CY Note: The figure for /Q is the April-May average. Sources: Ministry of Finance; Bank of Japan. World Economy Chart - Real GDP Growth Rate -7 average: +.% -7 average: +.% average: +.% IMF forecast (Apr-) CY Projections for Major Economies World.. Advanced Economies.. United States.8.9 Euro Area Japan.. Emerging Market and Developing Economies. 7.7 Developing Asia.7. China ASEAN.. Latin America and the Caribbean..7 Projections..9 (-.) (-.).. (.) (.).8. (.) (.).. (.) (.).. (-.) (.).9. (-.) (-.).7.8 (.) (.) (.) (.).9. (-.) (-.).. () (-.) () (-.) Note: Figures in parentheses are the difference from the January WEO. Source: IMF, "World Economic Outlook, April."

3 Domestic Demand Chart Business Fixed Investment Private Consumption 8 7 sa s.a., ann., tril. yen Private non-residential investment (GDP-based, real) s.a., ann., til tril. yen Private final consumption expenditure (GDP-based, real) CY CY Source: Cabinet Office. Consumer Prices Chart CPI (all items less fresh food) CY Note: The effects of the consumption tax hike (from percent to 8 percent) are calculated as having pushed up the year-on-year rate of change in the CPI for April by.7 percentage points for all items less fresh food. Source: Ministry of Internal Affairs and Communications.

4 . s.a., % Labor Supply and Demand Chart. Unemployment rate Structural unemployment rate..... CY Note: The structural unemployment rate is defined as the level of the unemployment rate where the number of vacancies equals that of the unemployed, given the empirical relationship between job vacancies and unemployment (estimation by the Research and Statistics Department, Bank of Japan). It captures frictional unemployment and unemployment caused by the mismatch between supply and demand in the labor market. Source: Ministry of Internal Affairs and Communications. Output Gap 7 quarterly, % CY Notes:. The output gap is estimated by the Research and Statistics Department, Bank of Japan. For the estimation procedures, see "The New Estimates of Output Gap and Potential Growth Rate," Bank of Japan Review Series, -E-. Notes:. Shaded areas indicate recession periods. Sources: Bank of Japan, etc. Chart 7 7

5 Inflation Expectations Chart Market Participants (BEI for Inflation-Indexed JGBs) % Old ( years) Old (longest) New ( years) -. CY ann. avg., % Economists to years ahead (ESP Forecast) 7 to years ahead (ESP Forecast) to years ahead (Consensus Forecasts). CY Notes:. BEI (break-even inflation) rates are yield spreads between fixed-rate coupon-bearing JGBs and inflation indexed JGBs. Inflation-indexed JGBs issued since October are designated as "new," while the rest are designated as "old." Figures for "old (longest)" are calculated using yield data for issue No. of the inflation-indexed JGBs, which matures in June 8.. Figures for the ESP Forecast exclude the effects of the consumption tax hikes. Sources: Bloomberg; Consensus Economics Inc.; JCER. 8 Phillips Curve Chart 9 CPI all items less food and energy, 98/Q-/Q B /Q A C A: 98/Q-/Q y =.x +.8 B: 98/Q-99/Q y =.x C: 99/Q-/Q y =.7x output gap (-quarter lead, %) Notes:. The red circled marks are the latest four positions. Notes:. Figures for the CPI are adjusted to exclude the effect of changes in the consumption tax rate. Notes:. The output gap is estimated by the Research and Statistics Department, Bank of Japan. For the estimation procedures, see "The New Estimates of Output Gap and Potential Growth Rate," Bank of Japan Review Series, -E-. Notes:. The number of lags is chosen so that the cross-correlation between the output gap and the CPI is maximized. Sources: Ministry of Internal Affairs and Communications; Cabinet Office; Bank of Japan, etc. 9

6 Potential Growth Rate Labor hours Number of employed Capital stock Total factor productivity Pt Potential tilgrowth rate Chart - - FY Note: The potential growth rate is estimated by the Research and Statistics Department, Bank of Japan. Figures for the second half of fiscal are those of /Q. Sources: Cabinet Office; Bank of Japan; Ministry of Internal Affairs and Communications; Ministry of Health, Labour and Welfare; Ministry of Economy, Trade and Industry, etc.

Japan's Economy: Achieving 2 Percent Inflation

Japan's Economy: Achieving 2 Percent Inflation Japan's Economy: Achieving Percent Inflation Speech at a Meeting Held by the Naigai i JoseiChosa Kai (Research Institute of Japan) in Tokyo August, 4 Haruhiko Kuroda Governor of the Bank of Japan Outlook