on february 12 has lowered interest rates both on overnight call money and term instruments. in addition, the markets ’ anxiety about liquidity and credit risks of japanese banks seems to have subsided – this report was written based on data and information available when the bank of japan monetary policy meeting was held on march 12, 1999. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on march 12, as the basis of monetary policy decisions. as reflected in a rapid contraction in the japan premium – partly due to the progress in preparation for public funds injection. meanwhile, the amount outstanding of funds in the call money market has decreased, partly because some institutional investors have shifted a part of their funds from the market to ordinary deposits. the shrinkage of the market has not led to any difficulty in funds settlement. however, close attention should be paid to developments in the flow of funds as unexpected changes may occur. long - term interest rates have, amid nervous market sentiment, declined following the fall in short - term rates. stock prices have turned to be firm against the background of the recent depreciation of the yen and the rise in u. s. stock prices. with regard to corporate finance, credit demand for economic activities such as fixed investment remains weak. firms ’ moves to increase their on - hand liquidity in the face of difficult fund - raising conditions are settling down. meanwhile, private banks have basically retained their cautious lending stance, facing the worsening performance of borrower companies. however, severity in their fund - raising conditions has been alleviated, and their insufficient capital base is about to be increased. under these circumstances, banks continue to actively utilize the credit guarantee system. as a result, the previously tightened credit conditions are easing somewhat. nevertheless, the market is still cautious of credit risk, and thus firms with relatively low credit ratings seem to remain under severe fund - raising conditions. the situation continues to warrant careful monitoring, particularly with regard to how corporate finance develops toward the turn of the fiscal year.

project, being developed by the 11 central banks of emeap economies, where emeap central banks will jointly invest in local currency denominated funds. as regards the third point, central banks in the region are now firmly focused on price stability and there is considerable progress in financial system reforms in each economy. these encouraging signals are, if anything, rather endogenous and market driven in their nature. yet, if we are to seriously explore the possibility of a single asian currency, strong political will is going to be essential at some stage. this is because, if the asian economies are to achieve convergence at a high level, rather painful reforms are indispensable. this is obvious if we look how difficult it is in europe to comply with the stability and growth pact. the introduction of a single currency by itself does not solve problems in each economy. neither does it yield economic growth. the full potential of a common currency can only be realized in so far as respective economies tackle structural problems in the process of achieving a monetary union. asian economies would experience significant dislocations if they were to form a monetary union without disciplined economic policies. in this context, we are paying attention to see if europe could succeed in advancing structural reform and achieve stronger growth by exploiting the heightened economic potential brought about by the introduction of the euro. before i finish, i would like to emphasize that asian integration would probably be soft - structured. each asian economy should endeavor to increase the attractiveness of their economy and currency for the time being. initially, this would mean additional flexibility. we can then share our experiences. at the same time, we should ensure that cultural diversities in the region would be translated into creative energy, and not clashes of culture. only then would we realize stable regional currencies, and the dream of a single currency would become a vision. thank you very much for your attention.