If the growth in those economies further accelerates, it will pose an upside risk to economic activity in Japan. Meanwhile, downside risks, although somewhat diminished, include the possible consequences of balance-sheet adjustments in the United States and Europe as well as potential changes in firms’ medium- to long-term growth expectations.
Moreover, attention should continue to be paid to various recent international financial developments and their effects. With regard to prices, there is a risk that inflation will rise more than expected in the event of a rise in commodity prices due to higher growth rates in emerging and commodity-exporting economies.