sentiment, although still weak, responding to the announcement of the comprehensive plan for financial revitalization, the so - called total plan, and to the emergence of expectations for permanent tax cut. in money markets, with the heightened awareness toward financial problems at a bank, concerns over credit risks of financial institutions strengthened once again, and upward pressure on interest rates suddenly mounted toward the end of june. however, with the ample provision of funds by the bank of japan and the announcement of the total plan, market anxieties settled down, and the upward pressure on interest rates gradually eased. with respect to monetary aggregates, growth in m2 + cds has been slowing, reflecting the sluggish private bank lending. these developments appear to strongly reflect the further decline in credit this report was written based on data and information available when the bank of japan monetary policy meeting was held on july 16, 1998. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on july 16, as the basis of monetary policy decisions. - 2demand of private firms with the worsening of overall economic activities, and the continued cautious attitudes of private banks in extending loans. meanwhile, some firms, especially small and medium - sized firms, have been facing difficult financing conditions in terms of both funds availability and fund - raising costs. this influence on the overall economy continues to warrant careful monitoring.

saying that " the division of labor is limited by the extent of the market. " the expansion of an economy or its market size, for example, from a village to a city, or from a city to a nation, promotes the division of labor and increases production capacity. at the same time, market expansion and the associated increase in purchasing power induce new entry into the market, which leads to more intensified competition and higher efficiency. this mechanism applies equally to economic globalization. the division of labor through international trade and the efficient use of managerial resources through direct investment are indispensable for economic development. ii. interdependence between japan and the rest of east asia east asian economies are the high - growth center of the world, with an average annual growth rate of more than 7 percent during the past ten years, which is significantly higher than that of industrialized countries. the nies first achieved high growth in the second half of the 1970s, closely following japan. then, from the mid - 1980s, east asia as a whole exhibited remarkable economic growth as the asean and chinese economies joined the advance. the mid - 1980s were the period when japanese companies took major steps toward globalization. at that time, many of them struggled to find new opportunities in their overseas business strategies such as building factories abroad and undertaking foreign direct investment to cope with the rapid appreciation of the yen and intensifying trade friction with the united states. in expanding into nies, japanese companies aimed at substantially reducing production costs, and maintaining or enhancing their competitiveness by taking advantage of the inexpensive and abundant local labor force in their processing and assembly bases. these activities of japanese companies contributed significantly to the creation of employment opportunities in east asia as well as the region's economic growth. in the 1990s, companies from all over the world, including europe and the united states, boosted their direct investment in east asia. they first invested in the asean countries, and then expanded to china. in terms of industries, it - related companies made significant inroads into the region as the it revolution progressed. although direct investment was temporarily halted by the asian currency crisis in 1997 - 98, it resumed as regional growth regained momentum. recently, japanese companies, not only manufacturing but also nonmanufacturing companies such as retailers, distributors, trading houses, and financial institutions, are actively engaged in businesses in east asia, particularly those related to china. these businesses include not only the relocation of labor - intensive production but also the expansion of new