markets for such instruments as corporate bonds and cp. on the other hand, credit demand of private firms continues to lack momentum as corporate demand for external funds is subdued, since firms ’ cash flow is at a high level. 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 somewhat. meanwhile, the amount outstanding of cp issued remains at a high level. recently, the growth rate of money stock ( m2 + cds ) is increasing reflecting the inflow from postal savings. funding costs for firms continue to decline as both short - and long - term prime lending rates were lowered, reflecting the decrease 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 still required for the effects of stock price developments on the behavior of financial institutions and the fund - raising conditions of firms.

bank of japan ’ s april report of recent economic and financial developments1 bank of japan, 16 april 2001. * * * the bank ’ s view2 adjustments in economic activities have been under way, as production is declining reflecting a fall in exports. with regard to domestic demand, business fixed investment is increasing. the recovery in private consumption continues to be weak as a whole, but there are somewhat positive signs in some indicators. housing investment is declining slightly. on the other hand, public investment is starting an upturn. while domestic demand remains steady, net exports ( real exports minus real imports ) are falling rapidly reflecting a sharp slowdown in overseas economies such as in the u. s. and east asia. mainly due to these developments, industrial production is declining more sharply, and excessive inventories of electronic parts and some materials are building up. the pace of improvement in corporate profits seems to be slowing significantly as exports and production are recently declining, and business sentiment of firms are worsening particularly in the manufacturing industries. income conditions of households have not yet deteriorated but the effects of the decline in production are starting to be observed in new job offers and overtime working hours. as for the outlook, public investment is expected to continue increasing for the time being. net exports, however, are likely to continue decreasing for a while, reflecting the ongoing adjustments in overseas economies. leading indicators suggest that business fixed investment is likely to peak out gradually, although the implementation of a backlog of orders is expected to sustain investment. in addition, the need for inventory adjustments, although not to a large extent, is intensifying for some goods. thus, industrial production is expected to follow a declining trend. in these circumstances, the increase in corporate profits is likely to be subdued, and recoveries in household income and consumption are projected to be sluggish. overall, the adjustments are expected to continue for some time, mainly in production. meanwhile, it is generally thought that overseas economies, particularly the u. s., will follow a gradual recovery trend from the latter half of 2001. in this case, helped also by the depreciation of the yen, exports are expected to underpin the economy once again. however, attention should still be paid to the possibility of a prolonged deceleration of overseas economies and risks of a negative impact on the economy induced by developments in foreign and domestic capital markets via corporate and household confidence. with regard to prices, import prices are rising, mainly reflecting the depreciation of