these circumstances, it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on japan's economic activity and prices. meanwhile, japan's financial system has maintained stability on the whole. even in the case of an adjustment in the real economy at home 1 / 2 bis - central bankers'speeches and abroad and in global financial markets, the financial system is likely to remain highly robust on the whole, mainly because japanese financial institutions have sufficient capital bases. regarding financial risks from a longer - term perspective, while there is a possibility that prolonged downward pressure on financial institutions'profits may lead to a gradual pullback in financial intermediation, the vulnerability of the financial system could increase, mainly due to the search for yield behavior. although these risks are judged as not significant at this point, it is necessary to pay close attention to future developments. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. at the monetary policy meeting held last month, the bank judged it was now within sight that the price stability target of 2 percent would be achieved in a sustainable and stable manner toward the end of the projection period of the january 2024 outlook report, as various data and anecdotal information from firms had gradually shown that the virtuous cycle between wages and prices had become more solid. on this basis, the bank considered that the policy framework of quantitative and qualitative monetary easing ( qqe ) with yield curve control and the negative interest rate policy to date had fulfilled their roles, and it therefore changed the monetary policy framework. specifically, the bank decided, among other measures, to set the uncollateralized overnight call rate as the policy interest rate and encourage that rate to remain at around 0 to 0. 1 percent. with the price stability target of 2 percent, the bank will conduct monetary policy as appropriate, guiding the short - term interest rate as a primary policy tool, in response to developments in economic activity and prices as well as financial conditions from the perspective of sustainable and stable achievement of the target. given the current outlook for economic activity and prices, it anticipates that accommodative financial conditions will be maintained for the time being. thank you. 2 / 2 bis - central bankers'speeches

bank of japan ’ s may report of recent economic and financial developments1 bank of japan, communication, 20 may 1999. the bank ’ s view2 japan ’ s economy, at present, has stopped deteriorating, but clear signs of recovery have not been observed yet. with regard to final demand, business fixed investment has been on a downward trend, and recovery in private consumption continues to be weak on the whole. net exports ( exports minus imports ) are leveling off. meanwhile, housing investment has been recovering. public works seem to be increasing rapidly against the background of the large increase in orders in early spring. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production has stopped decreasing. the deterioration in corporate and consumer sentiment seems to have ceased due to this economic situation as well as the improvements in the financial environment, including the subsidence of the public ’ s anxiety about the stability of japan ’ s financial system and the recovery in stock prices. however, corporate profits remain weak, and employment and household income conditions are deteriorating as the unemployment rate has been marking a historical high. conditions in corporate finance continue to improve, but firms ’ concern about the availability of funds in the future has not completely disappeared yet. as for the outlook, with the progress in inventory adjustment gradually paving the way for a recovery in production, the government ’ s economic measures and the monetary easing by the bank will continue to underpin the economy. improvements in the financial environment are also expected to exert positive effects on the economy gradually. with respect to corporate activities, however, firms have started taking steps toward full - scale restructuring, facing the continued decline in profits. although such corporate restructuring is expected to improve productivity, it may, in the short run, reduce fixed investment and discourage household expenditure through the resulting deterioration in employment and income conditions. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand. overall economic developments require careful monitoring in consideration of the above points. it is also important to promote structural reform, while preparing an environment that facilitates such reform, in order to assure the economy ’ s sustained growth in the medium term. with regard to prices, reflecting the large output gap, domestic wholesale prices are on a downtrend, and corporate service prices are weakening. import prices are rising due to the bottoming out of international commodity prices such as crude oil prices. consumer prices remain weak. in relation to price developments in the future, distinct narrowing in the output