we are still in a period of high uncertainty, and we should not exclude setbacks on the road back to sustainable growth rates and stable financial market conditions, we also need to prepare ourselves for “ normal ” times. in this respect, in particular with a view to the recent experience, we need to ask ourselves whether the way monetary policy is conducted needs to be changed. on that, let me first say that the primary objective of the ecb is and remains to maintain price stability over the medium term, and we have continued succeeding in that when looking at measures of inflation expectations which are well anchored in line with price stability. secondly, in our comprehensive assessment of economic and monetary developments we already take into account a wide set of indicators, including for example also asset prices and credit developments. thus, there is no need for changing our monetary policy framework in a fundamental way. nonetheless, the crisis has shown that a more detailed and refined analysis of financial market indicators is important for both, financial stability and monetary policy objectives. here we need to further invest and become more wary of how financial market risks can effect the macroeconomic environment. fiscal policies as regards fiscal policies, i am concerned about the projected strong increase of government deficit and debt levels in euro area countries. according to the european commission, the deficit ratio in the euro area would reach around 7 % of gdp in 2010 compared to 2 % in 2008 ; government debt as a ratio to gdp is expected to increase to 84 % compared to 69 % in 2008. 13 out of 16 euro area member states are now facing an excessive deficit procedure due to budget deficits above the 3 % of gdp deficit criterion of the maastricht treaty. certainly, the fiscal measures to stabilise the financial sector and the wider economy have helped to limit the adverse effects of the economic and financial crisis. however, it is now time to prepare ambitious and well - defined fiscal exit strategies. otherwise, government debt in the euro area is set to quickly rise to levels above 100 % of gdp, which might severely undermine the public ’ s trust in the sustainability of public finances. moreover, unsustainable debt developments would, in the medium to long - term, put upward pressure on interest rates. at the european level, the fiscal consolidation process should be guided by the rules of the stability and growth pact. first, this implies to set realistic but also sufficiently ambitious deadlines to correct excessive deficits in euro area countries. the ecofin council has adopted recommendations for country

, we can say that the financial system as a whole is restoring its soundness and evolving a forward - looking, more dynamic style of management. to sustain these actions, financial institutions need to upgrade the integrated risk management system, in which various types of complex risks are controlled in a consolidated manner, and construct a framework to deploy capital more efficiently. a draft of the new basel capital accord released at the end of june has adopted a risk - sensitive framework to encourage the upgrading of risk management. in line with this global trend, the bank of japan is working to improve the functioning of financial institutions through on - site examinations and off - site monitoring. price developments while the corporate goods price index, particularly raw materials and intermediate goods, has been rising partly because of higher crude oil prices, the consumer price index ( cpi ) has been on a slight downtrend. a small decline in the cpi is largely due to the unit labor cost reductions in the corporate sector reflecting higher productivity and the restraint on labor costs. thus, the outlook for prices depends on future developments in productivity and wages. three factors underpin the rise in productivity. first, resources are being used more efficiently as a result of the adjustment of excessive capital stock and labor as well as deregulation in a variety of areas, including the labor market. second, progress continues in it and technological innovation. third, as is generally observed during an initial phase of economic recovery, higher utilization of labor and equipment is increasing productivity. while the third factor is cyclical, the first two factors could spur structural changes, raising the potential production capacity of japan ’ s economy. many countries have experienced a situation in which prices do not necessarily increase in tandem with an upturn in economic activity. economists and central bankers have been exploring a plausible explanation of this discrepancy. from the viewpoint of conducting monetary policy, we are carefully monitoring price developments while keeping in mind the following questions. if the recovery continues, will the growth in productivity slow? or, will such growth continue thanks to deregulation and the progress in it? or, will wages rise along with the growth in productivity? in terms of developments in prices over the shorter term, we should pay attention to the effects of higher crude oil prices on the general price level. crude oil prices have been around record - high levels against the background of a rise in global demand and heightened concern about geopolitical risks. we have seen the impact of higher crude oil prices on the domestic corporate goods price