recognition among financial institutions and related parties that an appropriate evaluation of the economic value of nonperforming loans ( npls ), and higher provisioning and more aggressive write - offs of these loans based on such an evaluation, are important in accelerating the disposal of npls. further efforts have been made in this direction. in fiscal 2002, japanese banks recorded a large net loss for the second consecutive year. this result clearly reflected the severe conditions faced by the japanese financial system. at the same time, it signified the aggressive disposal of npls as shown by the substantial decrease in npls outstanding at major banks. the time has now come to move to the final stage to restore the effective functioning of the financial system, keeping in mind the complete removal of blanket deposit protection scheduled in april 2005. this removal, in my view, should not be perceived simply as a change in the type of coverage of deposit insurance protection. instead, it should be recognized as a turning point for financial institutions in the reform of their management. protection has been provided as a temporary buffer to avoid potential confusion. following the complete removal, financial institutions must pursue a dynamic management strategy based on their own judgment. to this end, it is the financial institutions themselves, not the regulatory authorities, that should take the initiative in dealing with npls. moreover, they should redouble their efforts to strengthen their earnings power besides accelerating the disposal of npls. v. disposal of npls and corporate revitalization in addition to the appropriate evaluation, higher provisioning, and more aggressive write - offs in the disposal of npls, increasing attention is being paid to the importance of corporate revitalization from the viewpoint of promoting the reform of industrial structure. the industrial revitalization corporation of japan ( ircj ), which began operation in may this year, recently decided to support four firms. the ircj will subsequently purchase the loan assets of these four firms from lenders other than their main bank, decide on a restructuring plan and then implement it. individual financial institutions, major banks in particular, are establishing a subsidiary specializing in corporate revitalization. moreover, we observe an increasing number of cases in which financial institutions set up an internal section specifically devoted to corporate revitalization, and form an alliance with outside experts like lawyers and certified accountants. the success of corporate revitalization requires a speedy and decisive response on the part of both firms and financial institutions. some firms with useful technology and expertise find it difficult to improve

bankers ’ speeches from the ending of support for some software programs and to the front - loading of demand prior to the strengthening of gas emission regulations. looking ahead, since corporate profits are likely to continue improving, business fixed investment is projected to follow a moderate upward trend as firms seek to expand capacity on the back of increased capacity utilization and as monetary easing continues to underpin demand for investment. with regard to private consumption, the outlook crucially depends on the effects of the consumption tax hike. to consider these effects, they need be divided into two aspects. the first aspect is the short - term effects of the decline in demand following the front - loading of consumption prior to the tax hike, while the second aspect is the longer - term effects of the decline in real incomes as a result of the tax hike, which will materialize only gradually. economic indicators released so far indicate a clear decline following the tax hike in purchases of durable goods such as automobiles, demand for which increased substantially prior to the tax hike. however, many firms indicate that the magnitude of the decline in consumption following the tax hike has been broadly in line with expectations and that private consumption continues to remain resilient as a trend. at this stage, it therefore appears that the effect of the decline in consumption due to the front - loading of demand is likely to start waning in the coming few months. as for the adverse effects through the decline in real incomes, the key will be to what extent improvements in the employment and income situation can alleviate these effects. with labor market conditions continuing to improve steadily, employee income is expected to continue rising moderately, and private consumption is likely to remain resilient. how the tax hike affects consumption is something we will continue to examine in the coming months. prices let me turn to price developments. the year - on - year rate of change in the consumer price index ( cpi, excluding fresh food ) was plus 1. 3 percent for four consecutive months from december last year to march this year, and, after excluding the direct effects of the consumption tax hike, accelerated somewhat to plus 1. 5 percent in april ( chart 5 ). breaking down the year - on - year rate of increase shows that price increases have been seen in a wide range of items reflecting that japan ’ s economy has continued to recover moderately, while energy - related goods have stopped pushing up the year - on - year rate of increase. with regard to the outlook, the year - on - year rate of change in the