zero percent or a slight increase toward the end of the year, as the effects of temporary factors, such as the decline in rice prices and the reduction in electricity and telephone charges, fall off. the year - on - year rate of change in the consumer price index ( cpi ) is expected to increase thereafter, as the japanese economy is likely to continue growing at above its potential rate, causing the gap between supply and demand to shrink further. on the financial front, the environment for corporate finance is becoming more accommodative on the whole. the lending attitude of financial institutions has been becoming more active. under these circumstances, the negative year - on - year change in the amount of lending by private banks observed since 1998 has gradually improved, and the amount of their lending is currently at around the previous year's level. the environment in the capital markets for firms raising funds through cp and corporate bonds continues to be favorable. ii. conduct of monetary policy the bank has been providing ample liquidity based on the quantitative easing policy. at the monetary policy meeting ( mpm ) on october 11 and 12, 2005, the policy board decided to maintain the target range for the outstanding balance of current accounts held at the bank at " around 30 to 35 trillion yen. " the framework of the quantitative easing policy is based on two key elements. the first element is the bank's provision of ample liquidity to the money market so that the outstanding balance of current accounts at the bank substantially exceeds the amount of required reserves. the second is the bank's commitment to firmly maintain this ample provision of liquidity until the year - on - year rate of change in the cpi registers zero percent or higher on a sustainable basis. regarding the first element, the bank's provision of ample liquidity contributed greatly to maintaining financial system stability and an accommodative corporate financing environment by responding to financial institutions'precautionary demand for liquidity when there were strong concerns about financial system stability. since then, such concerns have largely subsided, as evidenced by the smooth implementation of the full removal of blanket deposit insurance in april 2005. as a result, financial institutions'precautionary demand for liquidity has been on a declining trend. under these circumstances, since the mpm held on may 19 and 20, 2005, the bank has been allowing the outstanding balance to temporarily fall below the target range when it is judged, in a situation where the bank is doing its utmost to provide funds while at

bank of japan ’ s may review of monetary and economic trends in japan bank of japan, monthly economic review, 20 / 5 / 97. japan ’ s economy continues on a moderate recovery trend despite some fluctuations caused by the rise in the consumption tax rate, with private demand showing underlying firmness. with respect to final demand, public - sector investment has decreased, and housing investment has declined, reflecting the reversal in the stepped - up demand which took place ahead of the rise in the consumption tax rate. however, net exports have continued to rise and business fixed investment is increasing steadily. despite the reversal in the stepped - up demand caused by the consumption tax rate hike, the recovery in personal consumption has not been hindered, given the moderate but firm recovery in labor market conditions and income formation. in these circumstances, industrial production has been firm to recover the level of inventories which declined owing to the temporary surge in demand ahead of the rise in the consumption tax rate. meanwhile, prices have stopped declining, and growth in monetary aggregates has continued at around 3. 0 per cent. with regard to personal consumption, outlays for travel have continued to increase moderately. with respect to goods, sales particularly in expensive goods surged in march 1997 ahead of the rise in the consumption tax rate, followed by a decline in april as its reaction. passenger - car sales recorded buoyant two - digit growth year - to - year for six consecutive months between october 1996 and march 1997, but showed a two - digit decline year - to - year in april. although sales of electrical appliances, as well as sales at department stores and supermarkets, rose significantly in march 1997, april figures available for department stores in tokyo are significantly below the previous year ’ s level. however, the recovery trend in personal consumption do not seem to have been hindered, as labor market conditions as well as household income formation are improving steadily, albeit moderately. among leading indicators of business fixed investment, machinery orders have increased steadily. construction floor area has also continued to recover moderately. with respect to housing investment, housing starts in terms of the seasonally - adjusted annual rate reached a significantly high level in the fourth quarter 1996, partly reflecting the stepped - up demand ahead of the rise in the consumption tax rate. later, they declined as the surge in demand reversed. regarding public - sector investment, the amount of public works contracted has quite recently picked up somewhat, reflecting orders included in the supplementary budget for fiscal 1996. however, public - sector