is an american way of business, a french way, an italian way, and a chinese way. in fact, such diversity makes the world very rich, in the same way as we enjoy japanese food, chinese food, french food, italian food, and american hot dogs and hamburgers. as far as financial business is concerned, however, i think there are a number of similarities between japan and the united states. by this, i mean not only a growing similarity in terms of financial businesses in recent years, but also plenty of similarities in terms of financial developments in history as well. i am referring to not just rosy episodes but also painful experiences. united states from the 1970s through the 1980s, the us financial system weathered several seismic difficulties. failures of franklin national bank in 1974, penn square bank in 1982, and continental illinois national bank in 1984 are particularly memorable. the latin american debt crisis in 1982 put enormous strains on us money center banks. over - stretched investment boom was one of the culprits for the savings & loans ( s & l ) debacle in the late 1980s. in the wake of traumatic experiences in the 1970s and 1980s, the us regulatory framework was revamped to better prepare for future contingencies in the financial system. the enactment of the federal deposit insurance corporation improvement act ( fdicia ) in 1991 marked a watershed in the regulatory context. in the 1990s, deregulation for financial business progressed, prompting large - scale consolidation among us financial institutions such as the mergers of chemical bank and chase manhattan bank ( 1996 ), travelers group and citicorp ( 1998 ) and chase manhattan bank and jp morgan ( 2000 ), to name just a few examples. according to a study by finance ministry and central bank deputies of the group of ten ( g10 ), the united states accounted for nearly 55 % of the merger and acquisition ( m & a ) activities in the financial industry during the 1990s, centering heavily on the banking sector. this trend to consolidation continues in the 21st century. us banks ’ stronger earnings and capital base have given a further boost to consolidation, including the creation of a financial colossus by jp morgan chase ’ s recent marriage with bank one ( 2004 ). primary motives behind the current wave of consolidation are revenue enhancement by synergy as well as its stability through product and geographic diversification, in addition to cost savings through economies of scale. increased competition and stronger pressure from shareholders accentuate the urgency of revenue enhancement for many

bank of japan ’ s may report of recent economic and financial developments1 bank of japan communication, 21 / 5 / 98. the bank ’ s view2 japan ’ s economy remains stagnant with continued strong downward pressures on economic activities. with respect to final demand, public - sector investment seems to have bottomed out. however, growth in net exports has virtually peaked out as exports to other asian countries decline. business fixed investment has been on the decline. private consumption shows no sign of recovery although the deterioration has slowed. housing investment remains weak. against the background of weak final demand, inventories have accumulated further and industrial production continues to decline. as a result, not only corporate profits but also employment and income conditions have worsened significantly. the above indicates that production, income, and expenditure show negative interactions with one another. in these circumstances, the economic stimulus package was decided, and the fiscal 1998 supplementary budget bill was submitted to the diet. these measures are expected to boost demand through additional fiscal expenditure and special income tax - reduction and thereby alleviate the downward pressures on the economy. in order for the japanese economy to resume a self - sustained recovery, improvements in corporate and household confidence are vital. hence, the overall economic activity and the effects of the economic stimulus measures should be carefully monitored. with regard to prices, wholesale prices continue to fall, and the year - to - year increase in consumer prices ( excluding the effects of institutional changes such as the rise in the consumption tax rate ) has been declining close to zero. as for the future, the downward pressure on domestic prices, induced by the decline in import prices including overseas commodity prices, is weakening. also, the expansion in the output gap in the economy is expected to slow as the economic stimulus package is implemented. in the immediate future, however, prices are likely to weaken reflecting the present high inventory level and the relatively large output gap. in the financial markets, both long and short - term interest rates followed a declining trend with the releases of weak economic indicators. yields on long - term government bonds have recorded a historical low and stock prices remain soft. the yield differential between bonds issued by the private sector and those by the government, as well as the so - called “ japan premium ”, has remained at the relatively high level and shown no significant decrease, indicating the continuing cautious attitudes of market participants toward credit risk. with respect to monetary aggregates, the growth in m2 + cds, which had picked up from the end of 1997, slowed