bank of japan ’ s february review of monetary and economic trends in japan bank of japan, monthly economic review, 18 / 2 / 97. a moderate economic recovery continues in japan as private demand shows increasing firmness. with respect to final demand, public - sector investment has decreased while net exports are on an increasing trend. housing investment has remained at a high level and business fixed investment is increasing steadily. while growth in personal consumption has been moderate on the whole, passenger car sales, which have a strong influence on production, have accelerated significantly. meanwhile, inventories on the whole are at appropriate levels. in these circumstances, industrial production has recently increased at a somewhat fast pace and labor market conditions have continued to improve moderately. meanwhile, prices have stopped declining, and monetary aggregates continue to grow at 3. 0 - 4. 0 per cent. with regard to personal consumption, sales at department stores and supermarkets are improving moderately, albeit with some fluctuations. outlays for travel have remained firm. growth in sales of electrical appliances has become somewhat moderate as the pace of expansion in personal computers and cellular telephones decelerated. passenger car sales have recorded buoyant two - digit growth year - to - year for four consecutive months since october 1996. among leading indicators of business fixed investment, machinery orders are increasing steadily on average, although they are expected to show a decline in the first quarter of 1997 as a reaction to the large increase recorded in the fourth quarter of 1996 in both the manufacturing and non - manufacturing sectors. construction floor area has also continued to pick up moderately. with respect to housing investment, housing starts have remained strong reflecting low interest rates and reasonable housing prices. they recorded a high seasonally - adjusted annual rate of over 1. 7 million starts in the fourth quarter of 1996, partly reflecting the rise in orders ahead of the consumption tax rate hike. regarding public - sector investment, public works contracted showing developments in orders have decreased significantly since autumn 1996 compared to the high level recorded in the previous year which reflected the large economic stimulus package. as for actual implementation of public works, with a time lag after orders, the seasonally adjusted level of shipments of related goods has been decreasing since autumn 1996 after having increased until the summer. real exports have recently shown an increasing trend as the effects of the yen ’ s depreciation since summer 1995 have gradually permeated. meanwhile, the increase in real imports has slowed, also reflecting the depreciation of the yen. as a result

more active stance of investors to take credit risks. on the other hand, credit demand of private firms continues to lack momentum as the level of corporate expenditures such as business fixed investment remains below firms ’ cash flow. moreover, firms continue to reduce their debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks ’ lending remains sluggish. the amount outstanding of corporate bonds issued continues to be above the previous year ’ s level but the growth rate is slowing. meanwhile, the amount outstanding of cp issued is well above that of the previous year marking the highest level to date. the year - to - year growth rate of money stock ( m2 + cds ) is around 2. 5 percent. funding costs for firms are declining reflecting developments in market interest rates. in this financial environment, the lending attitude of financial institutions and corporate financing conditions remain easy. for the time being, attention should be paid to the effects of the additional monetary easing measures taken by the bank, while careful monitoring is required for the effects of stock price developments and corporate profit conditions on the behavior of financial institutions and the fund - raising conditions of firms.