other hand, the improvement in economic activities has not stimulated corporate demand for external funds, since firms ’ cash flow is increasing in parallel with a recovery in profits. moreover, firms continue to reduce debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks ’ lending seems to remain sluggish although its year - on - year rate of decline slowed in april for the second consecutive month. issuance of corporate bonds and cp has been steady. money stock ( m2 + cds ) grew faster in april compared with the previous month on a year - on - year basis. in this financial environment, corporate financing conditions are easing, and the lending attitude of financial institutions is perceived by firms as less severe. it continues to warrant careful monitoring how these favorable developments in the corporate financing environment will affect economic activities.

, is significant in that the company is one of japan ’ s four largest securities companies. furthermore, considering the fact that the japanese financial system is being viewed more critically and that yamaichi conducted a wide range of business in domestic and overseas markets and had a large number of customers, any difficulties in returning customers ’ assets or in settling outstanding transactions in the process of closing down the company were quite likely to lead to withdrawal of customer assets from other securities companies or disrupt market transactions. if no measures had been taken to prevent such a situation, the credibility of the japanese financial system could have been seriously eroded and disruptions could have been caused in domestic and overseas financial markets, in the end seriously affecting overall economic activity in japan. against this backdrop, the bank decided to provide yamaichi with necessary liquidity under article 25 of the bank of japan law in order to minimize the adverse impact of the closing down of the company ’ s business on the domestic and overseas financial markets as well as the japanese economy. the bank ’ s measures had their intended effect : payment and settlement were executed smoothly by the failed institutions, and thus the materialization of systemic risk was avoided. however, the failures of large depository institutions and a securities company made the behavior of market participants very cautious, and as a result, it became difficult for transactions to come to terms, placing upward pressures on market interest rates. therefore, to fulfil the second requirement in containing systemic risk, the bank exerted itself to its utmost to avoid declines in market liquidity through market operations. the bank utilized various market operations means to provide sufficient liquidity in the markets, to thereby support smooth market transactions and stable formation of market interest rates. - 3since september 1995, the bank has conducted market operations in order to maintain the uncollateralized overnight call money rate at a level on average slightly below the official discount rate. however, demand for funds in the market heightened following the series of financial institution failures, and at the end of november 1997, the call money rate rose far above this targeted level. the bank therefore made continuous efforts to supply sufficient liquidity to the market, and as a result the rate has recently declined to the targeted level. rates on longer - term money market instruments, however, especially 1 - month rates on end - of - year funds, remain high due to a rise in the “ japan premium ” - - the extra funding cost that japanese banks have to pay compared to leading u. s.