While I have thus far explained the baseline scenario for economic activity and prices, the Bank is also fully aware of the risks concerning such scenario. Upside risks to the scenario are developments in emerging and commodity-exporting economies. The robust growth of emerging and commodity-exporting economies has driven the pick-up of Japan’s economy.
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.