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I. Current Situation of Economic Activity and Prices

A. Economic Developments Abroad

I would like to begin my speech by talking about the current situation of overseas economies. The pace of recovery in overseas economies has slowed as the effects of rapid policy interest rate hikes that have been carried out by central banks since 2022 have gradually started to weigh on the real economy. In its January 2023 World Economic Outlook (WEO) Update, the International Monetary Fund (IMF) projected that the global economic growth rate would slow from an estimated 3.4 percent in 2022 to 2.9 percent in 2023. An indicator measuring business sentiment has stayed below 50, the break-even point between improvement and deterioration (Chart 1).

Let me take a look at developments in overseas economies by major region. In the United States, private consumption and the employment situation have been firm. However, a marked impact of policy interest rate hikes has been seen in housing investment, as evidenced by, for example, a decline in the number of housing starts. Production has remained more or less flat. In Europe, as the resumption of economic activity from the COVID-19 pandemic has run its course, signs of slowdowns are becoming clearer due to strong inflationary pressure stemming from the continued effects of the situation in Ukraine. In China, although private consumption and production have been weak, due in part to the surge in the number of COVID-19 cases at the end of 2022, there have been moves toward normalization of economic activity recently. Albeit with variation across countries and regions, as outlined earlier, signs of slowdowns in overseas economies are becoming clearer on the whole.

B. Economic Developments in Japan

Turning to the current situation of Japan's economy, the overall picture shows that it has picked up, particularly in terms of business fixed investment and private consumption, as the resumption of economic activity has progressed while public health has been protected from COVID-19. I would like to describe Japan's economic situation from two aspects: the corporate sector and the household sector.

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