because such an approach offers a near - term and cost - effective remedy to the systemic risks posed by hlis. challenges for the banking industry i strongly believe that both the official and private sectors have important roles to play in addressing the challenges arising from an increasingly complex and dynamic financial services industry. first and foremost, we hold banks accountable for ensuring that sound credit risk management standards are upheld and that these keep pace with financial market innovation. if competitive pressures lead to bad practices in one bank or the industry as a whole, our job as supervisors is to raise standards and ensure that sound practices are restored. in my remarks today, i highlighted a number of areas where progress has been made. of course, there is more work to be done by banks and supervisors. high on the agenda should be the development of more meaningful measurement of risk exposure and the implementation of effective stress - testing techniques. another important area that requires further industry attention is the measurement of leverage. finally, i believe that the industry should devote more thought to the appropriate valuation of positions during periods of market stress and illiquidity – which is particularly relevant to the use of collateral to protect against credit risk. these are just some of the broader issues arising from the ltcm experience and the market turbulence last fall. but i believe that we are meeting the challenge and have made quick and significant short - term progress. i look forward to your questions.

tadao noda : my answers to the frequently asked questions regarding monetary policy speech by mr tadao noda, member of the policy board of the bank of japan, at a meeting with business leaders, shiga, 4 march 2010. * * * introduction i was appointed as a member of the policy board of the bank of japan in june 2006 after having worked mostly at a bank and also at firms in the private sector, for a total of 37 years. thus, my background does not make me a central banker in the strictest sense. however, since my appointment as a full - time bank officer, i am able to draw on my experience in the private sector in day - to - day deliberations and discussions on monetary policy and the bank ’ s operations. today, in this speech, i will present my views by means of answering frequently asked questions ( faqs ) about economic and financial developments and the conduct of monetary policy. broadly speaking, i will discuss the following three faqs. i. where is japan ’ s economy heading? ii. how is the bank ’ s monetary policy conducted? iii. what is the cause of, and remedy for, the issue of deflation? i. the outlook for japan ’ s economy : where is it heading? i will first discuss where japan ’ s economy is heading. a. the current situation : the economy has been picking up, but the momentum to support self - sustained recovery is still weak japan ’ s real gdp growth rate was in the range of 2 – 3 percent from fiscal 2003 to fiscal 2006, but dropped to 1. 8 percent in fiscal 2007. in fiscal 2008, economic conditions deteriorated substantially and the economy registered negative growth of 3. 7 percent. after the failure of lehman brothers, extreme cautiousness spread in many financial markets and the flow of funds necessary for economic activity contracted, rapidly reducing global demand. demand in japan fell sharply, mainly in leading industries – notably automobiles, electronic machinery, and general machinery – and the economy was affected more heavily by the global financial crisis than that of the united states, where the crisis started. since the beginning of fiscal 2009, japan ’ s economy has been picking up, as shown by the relatively large growth in the real gdp growth rate on a quarter - on - quarter basis for two quarters – the april – june and october – december quarters – although it registered 0 percent growth for the july – september quarter. exports have been increasing due to the improvement in overseas