New Phase

Shigemitsu Miki Vice Chairman, Nippon Keidanren President, The Bank of Tokyo-Mitsubishi, Ltd.

The global economy is now entering a new phase. In the U.S., which has been the engine of global economic expansion, the Federal Reserve moved in June to tighten monetary policy for the first time in four years. In August and September, interest rates were raised again, heralding an adjustment of the ultra-low interest rate policy that has supported economic expansion so far. At the same time China's economy, the other engine of global growth, continues to grow strongly, however, a number of policy-tightening measures have recently slowed the pace of its growth.

What of Japan? Japan's real GDP growth rate has recorded positive growth for five consecutive quarters, including the most recent April to June period, and taking January 2002 as a starting point Japan has seen a long phase of economic growth. Since the bursting of the bubble the Japanese economy has for a long period been criticized for its dependence on external demand. It is pleasing that private domestic demand, in particular private consumption and capital expenditure, is now driving growth. Japan's economy is gradually changing and in the future it must take on a central role in the stable growth of the global economy. To achieve this, structural reform of the Japanese economy must be firmly established so as to form the basis of sustained growth centered on private domestic demand.

The financial world in Japan is also entering a new phase. In the last fiscal year many financial institutions managed to achieve profits while passing the worst of the nonperforming loans problem. This is clearly a turning point. Now, as they emerge from the long, dark tunnel of the nonperforming loan issue, each financial institution is exhibiting its originality and actively building a new business model to strengthen profits. In short, I believe that we are rapidly entering a new financial era.

As the final year of the period of the concentrated disposal of nonperforming loans the current fiscal year must clearly draw a line under the nonperforming loan problem. Simultaneously, in order to win out against the competition in this new financial era, the financial services business must return to its roots and provide an array of value-added financial products and services that meet the diversifying needs of customers. By so doing, I believe that trust in the financial system will be strengthened, which in turn will support the renewed development of Japan's economy and industry.