After experiencing a sharp rebound from a plunge caused by the earthquake toward summer last year, economic activity has been more or less flat, reflecting downward forces deriving from the effects of a slowdown in overseas economies and the appreciation of the yen. More recently, there have been some signs of a pick-up.
The Bank of Japan believes that the economy will gradually emerge from the current phase of flat growth and return to a moderate recovery path as the pace of recovery in overseas economies picks up, led by emerging and commodity-exporting economies, and as reconstruction-related demand after the earthquake disaster gradually strengthens. The plausibility of such an outlook depends on the following two factors.