, the interest rates were administered and the statutory liquidity ratio ( slr ) requirements of the banking sector were periodically hiked. in this regard, the nationalisation of banks and transfer of ownership to government provided a captive market for the government. simultaneously, recourse to the rbi credit was also high, leading to high levels of monetisation. to neutralise the effect of monetisation on the price level, the rbi, in turn, had to intermittently increase the cash reserve ratio ( crr ) requirements of the banking sector. this phase was charaterised by several features to indicate considerable influence or dominance of government over the rbi. on the basis of one of the criteria ( cukierman, 1992 ) to measure the degree of independence of various central banks during the ‘ eighties, the rbi was ranked marginally below the median level of a list of about seventy countries ( including twenty - one industrialised countries ). this represented a limited degree of statutory autonomy because in general, central banks in developing countries enjoyed little independence from the government at this time. as such, the measurements seem to reflect the intent of the 1948 nationalisation of the rbi, which was to ensure a greater coordination of monetary, economic and financial policies. the fourth phase or the reforming phase in the changing contour of this relationship approximately starts from 1990 - 91. major changes in the monetary policy framework took place in many countries around this time. while people in many developed countries were tired of persistent and high inflation during the earlier years, the journey of the centrally planned economies towards a market determined system also began around this time. as a result, the relationship between the central bank and the government took a new turn in many countries, resulting in the genesis of inflation targeting framework in a number of economies. while radical changes were taking place worldwide, the indian economy during 1990 - 91 experienced a severe balance of payments crisis. the crisis was clearly a fallout of the fiscal profligacy during the eighties. during the post - reform period, the relationship between the central bank and the government took a new turn through a welcome development in the supplemental agreement between the government and the rbi in september 1994 on the abolition of the ad hoc treasury bills to be made effective from april 1997. the measure eliminated the automatic monetisation of government deficits and resulted in considerable moderation of the monetised deficit in the latter half of the nineties. at the same time, with gradual opening up of the economy and development of domestic

bank of japan ’ s february report of recent economic and financial developments1 bank of japan, 5 february 2004. * * * the bank ’ s view2 japan ’ s economy is recovering gradually. exports are recently increasing substantially and business fixed investment continues a gradual recovery. reflecting these developments, industrial production is also increasing. the decline in household income is gradually coming to a halt and private consumption is virtually flat. meanwhile, housing investment remains sluggish and public investment is declining. as for the outlook, japan ’ s economy is anticipated to continue recovering, albeit at a moderate pace. overseas economies are projected to continue growing relatively fast. based on this projection, it is expected that exports and production will continue increasing and that the recovery trend in business fixed investment will also become more visible. however, given persisting structural factors such as excessive debt, the increase in business fixed investment is expected to remain moderate. private consumption is likely to remain virtually flat for some time, since the employment and income situations are unlikely to improve markedly. meanwhile, public investment is projected to follow a declining trend. on the price front, domestic corporate goods prices have been firm, due to the rise in rice prices and the strengthening of overseas and domestic commodity prices. the year - on - year rate of change in consumer prices ( excluding fresh food ) has been close to zero percent, while temporary factors such as the rise in rice prices have exerted upward pressure on prices. turning to the outlook, domestic corporate goods prices are expected to remain firm for the immediate future. as for consumer prices, the year - on - year rate of change is likely to be around zero percent for the time being due partly to the rise in rice prices. however, they are basically projected to continue falling slightly, since the imbalance between supply and demand in the economy still remains considerable despite its gradual improvement. as for the financial environment, the environment for corporate finance is becoming somewhat more accommodative on the whole, although it is still severe for firms with high credit risks. the issuing environment for cp and corporate bonds is favorable on the whole, especially for firms with high credit ratings. also, the lending attitudes of private banks have been slightly more accommodative. the pace of decline in credit demand in the private sector is becoming somewhat moderate. under these circumstances, the amount outstanding of cp and corporate bonds issued continues to be above the previous year ’ s level, and the rate of decline in lending by private banks is dimini