in march and april. also, the growth in broadly - defined liquidity has been declining since the middle of 1997. 1 this report was written based on data and information available when the bank of japan monetary policy meeting was held on may 19, 1998. 2 the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on may 19, as the basis of monetary policy decisions. private bank lending remains sluggish. although corporate financing via the capital markets and government financial institutions continues to expand, the increase in overall corporate financing seems to indicate a clear slowdown under the stagnant economic conditions. banks remain cautious in extending loans with a view to improving their medium - term profitability and financial soundness. in the capital markets, the difference in fund - raising costs of firms has remained relatively large according to their creditworthiness. in such circumstances, some firms, especially small and medium - sized firms, have been facing difficult financing conditions and this influence on the economy continues to warrant a careful monitoring. * * * nb this bis review is available on the bis world wide web site ( http : / / www. bis. org ). _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

##s an attitude of benign neglect or is indifferent to the exchange rate. a strong euro is in europe ’ s interest and in ireland ’ s interest. the more stable it is at home, the better its prospects on the international stage. credibility is never easy. in the normal course, it is built on a good track record. one obvious measure of credibility for a currency is long - term interest rates. in this respect the euro is faring well. it is evident that the financial markets believe that stability will be maintained within the euro area. ireland and the euro the irish economy is just one percent of the total euro area economy. it follows that irish experience will not greatly influence nor dictate policy. our experience up to now has been decidedly different from that of the euro area generally, because of the scale of economic growth here in recent years. as a consequence, we have had to adjust to a monetary policy which, in the short term, is not well suited to irish conditions. there is nothing that we can do about this in terms of tightening monetary policy. we cannot raise interest rates unilaterally to suit our circumstances. while euro interest rates have risen in recent months, they remain substantially below what the central bank would consider as appropriate here in the present buoyant conditions. there is no longer an irish exchange rate. we cannot impose formal ceilings or restrictions on the growth in credit, which is running at a very uncomfortable rate. we do require the lending institutions, however, to observe good prudential standards. as monetary policy is no longer determined to suit irish conditions, our economy is more vulnerable than before to overheating and the consequences of this - inflation and a loss of competitiveness. the central bank ’ s ability to take corrective action is severely restricted. a greater onus is now placed on other factors, such as fiscal and incomes policies. in particular, there is a greater need to use fiscal policy to contain strong demand. continuing economic success must not blind us to the reality that we are in a new regime which, sooner or later, may demand from us disciplines to which we are unaccustomed. because of the uncertainties linked to sterling, it would be to our advantage if the uk were to join the euro area sooner rather than later. the indications are, however, that the uk is unlikely to become a member at an early stage. besides, if it should decide to join, it will presumably have to satisfy entry requirements in relation