and chemical products reflecting the increase in crude oil prices to date. meanwhile, consumer prices continue to be somewhat weak owing to the slight decrease in the prices of private - sector services and the decline in prices of imported products reflecting the past appreciation of the yen. corporate service prices are still falling slowly. as for the outlook, upward pressure on prices is likely to arise from the gradual improvement in domestic supply - demand balance and from the rise in crude oil prices. on the other hand, downward this report was written based on data and information available when the bank of japan monetary policy meeting was held on 12 june 2000. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 12 june 2000 as the basis of monetary policy decisions. pressure is expected from the long - term declining trend of machinery prices due to technological innovations and from the fall in prices of imported products reflecting the past appreciation of the yen. on balance, overall prices are likely to remain unchanged. however, attention should still be paid to the downward pressure on prices stemming from weak demand, although the pressure has weakened given some recovery in private demand. in the financial market, the overnight call rate has generally stayed near zero, and financial institutions have been confident about the availability of overnight funds. the amount of funds outstanding in the call money market is declining gradually. interest rates on term instruments basically continue to be stable but have increased somewhat from the start of june. the japan premium remains negligible. yields on long - term government bonds have been moving in the range of 1. 6 - 1. 8 percent. the yield spread between private bonds ( bank debentures and corporate bonds ) and government bonds remains mostly unchanged. stock prices fell sharply until the end of may triggered by the drop in u. s. stocks but have recovered thereafter. in the foreign exchange market, the yen temporarily rose to around 110 yen in mid - may but then strengthened against the u. s. dollar. the yen is currently being traded in the range of 105 - 107 yen. with regard to corporate finance, private banks have basically retained their cautious lending attitude. however, constraint that had been caused by severe fund - raising conditions and insufficient capital base has eased considerably. given this, major banks are becoming more active in extending loans, while carefully evaluating the credit risks involved. on the other hand, the improvement in economic activities has not stimulated corporate demand for external funds, since firms ’ cash flow is increasing in

for banks to establish good risk management policies addressing the issues i have just discussed, so that strong risk discipline is codified. concluding thoughts of course, it is not just the banking industry, but also those of us in the public sector who have some key lessons to learn. banks and supervisors alike need to undertake additional work to facilitate the building of robust methods of quality assurance in the financial markets that will help to restore and maintain confidence. ensuring that banks exercise good risk management, of course, is an important job for bank supervisors, which includes overseeing their ability to properly capture the risks in the markets in which they operate, as well as their ability to conduct appropriate stress testing to explore potential consequences of different types of market distress. doing so requires that supervisors themselves develop a strong understanding of the value, limits, and potential harms associated with banks'attempts to protect their exposures. at the federal reserve, we have already begun to enhance our supervisory work in this area and are communicating expectations to banks. at the international level, we are working with our colleagues in other countries and within international bodies, such as the basel committee on banking supervision – which is meeting later this week – and the financial stability forum, to investigate whether other practices could be adopted around the world to mitigate the challenges i have outlined above. this work will be a major focus during the next few months and over the course of 2009. randall s. kroszner, 2008, " improving the infrastructure for non - agency mortgage - backed securities, " speech delivered at the federal reserve system conference on housing and mortgage markets, washington, d. c., december 4.