bank ’ s continuation of easy monetary stance and the government ’ s new economic stimulus package are expected to underpin the economy. however, risks of downward pressures on the economy induced by the slowdown in overseas economies as well as developments in foreign and domestic capital markets, need more careful monitoring for the time being. with regard to prices, import prices are rising, mainly reflecting the depreciation of the yen. domestic wholesale prices are declining somewhat mainly due to the decrease in prices of electrical machinery, although the rise in crude oil prices was passed on to the prices of petroleum products. consumer prices continue to be somewhat weak owing to the decline in prices of other imported products and their substitutes, despite the increase in prices of petroleum products. corporate service prices are still falling slowly. as for the conditions surrounding price developments, the recent yen depreciation is exerting upward pressures on prices. moreover, the balance between supply and demand in the domestic market is this report was written based on data and information available when the bank of japan monetary policy meeting was held on january 19, 2001. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on january 19 as the basis of monetary policy decisions. projected to be on a gradual improving trend, while an economic recovery is expected to continue at a moderate pace. recently, however, the pace of recovery seems to be slowing and crude oil prices, which had been exerting upward pressures on prices, are falling. the declining trend of machinery prices due to technological innovations and the decrease in prices of consumer goods arising from the streamlining of distribution channels will continue to exert downward pressures on prices. overall, prices are expected to be somewhat weak for the time being. in the financial market, the overnight call rate is generally moving around 0. 25 percent. interest rates on term instruments have declined after the increase towards late december. the japan premium remains negligible. yields on long - term government bonds have been around 1. 5 - 1. 7 percent since the end of november and are recently moving in the range of 1. 5 - 1. 55 percent. the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds are mostly unchanged or expanding somewhat. stock prices continue to be weak and are moving around the lowest level recorded since the beginning of 2000, while having recovered somewhat recently. in the foreign exchange market, the yen has been depreciating sharply since

of minimizing market over - reactions and facilitating the prompt recovery of market functioning, initiatives by market participants to further enhance information disclosure are highly desirable. greater market transparency could be achieved, for instance, through the disclosure by financial institutions of the outstanding amounts of their investments and information concerning their profits and losses, as well as the provision by rating agencies of detailed information relevant to credit ratings. i would like to emphasize that we do not view the recent development of financial markets, especially for securitized products, in a negative light. risk diversification using new financial products has broadened the range of participants in financial markets, and has contributed significantly to the growth of the world economy. the problem has been that the techniques to assess and manage the associated risks have not kept up with the pace of product innovation. what we need is to improve those techniques. at the bank of japan, we will continue to closely monitor developments in global financial markets and to assess their implications for the japanese financial system. at the same time, we will study and analyze in greater depth the various risk management issues i have discussed today, and so contribute to the enhancement of risk management by japanese financial institutions. closing remarks amid intensifying global competition, chubu, which has an industrial sector that is highly competitive at the international level, has been pulling the japanese economy forward. i feel confident that the chubu region will make use of the advanced technological expertise it has built up to take advantage of new business opportunities, and to enjoy further breakthroughs. i believe this will in turn lead to the sustained and dynamic growth of japan's economy.