nevertheless, developments including the situation surrounding the european debt problem – particularly discussions on the support package for cyprus and developments in italy following the general election – require continued attention. third, factors that had been exerting downward pressure on the economy, such as the effects of the decline in car sales due to the ending of subsidies for purchasers of environmentally friendly cars and the effects of the recent bilateral relationship between japan and china, have fallen off or diminished. under these circumstances, exports appear to stop decreasing. business fixed investment has shown some weakness on the whole, although resilience has been observed in nonmanufacturing. in contrast, public investment has continued to increase, and housing investment has generally been picking up. private consumption has remained resilient, bis central bankers ’ speeches supported mainly by demand from the elderly. reflecting these developments in demand both at home and abroad, industrial production has stopped decreasing. with regard to the outlook, the pick - up in japan ’ s economy is expected to become more evident around mid - 2013, mainly against the background that domestic demand remains firm partly owing to the steady implementation of various economic measures and that overseas economies gradually emerge from the deceleration phase. financial conditions in japan are accommodative. in terms of interest rates, the overnight call rate has remained at an extremely low level, and firms ’ funding costs have been hovering at low levels. with regard to credit supply, firms have continued to see financial institutions ’ lending attitudes as being on an improving trend. issuing conditions for cp and corporate bonds have remained favorable on the whole. as for credit demand, firms have shown signs of increasing their demand mainly for working capital and funds related to mergers and acquisitions. in these circumstances, firms have retained their recovered financial positions on the whole. on the price front, the year - on - year rate of change in the consumer price index ( cpi, all items less fresh food ) is around 0 percent. for the next few months, it is expected to turn negative due to the reversal of the previous year ’ s movements in energy - related and durable consumer goods. thereafter, however, the year - on - year rate of change in the cpi is expected to start a moderate increasing trend as the aggregate supply and demand balance continues a moderate improving trend with japan ’ s economy on a moderate recovery path. there remains a high degree of uncertainty concerning japan ’ s economy, including the prospects for the european debt problem, the momentum toward recovery for the u.

s. economy, the possibility of emerging and commodity - exporting economies making a smooth transition to the sustainable growth path, and the effects of the recent bilateral relationship between japan and china. recent developments in financial markets appear to assume that the global economy will emerge from the deceleration phase and pick up. the bank will continue to carefully examine whether the uncertain factors surrounding the global economy will be dispelled smoothly. ii. conduct of monetary policy next, i will explain the bank ’ s conduct of monetary policy. japan ’ s economy has suffered from deflation for nearly 15 years. this is an extraordinary situation even on a global scale. a vicious cycle – where a decline in prices causes wages and profits to contract, thereby reducing investment and consumption, consequently leading to a further decline in prices – has been causing a deterioration in japan ’ s economy. overcoming deflation at the earliest possible time is the most critical issue facing japan ’ s economy. ensuring price stability is the mandate of the central bank, and the role of the bank in overcoming deflation is extremely important. the bank has engaged in a wide range of efforts – from implementing the zero interest rate policy and the quantitative easing policy, to pursuing monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth in more recent years – but fallen short of overcoming deflation. there are many factors – both at home and abroad – exerting downward pressure on prices in japan : an increase in cheap imports from overseas, increased distribution efficiency mainly due to deregulation, and the consequent low - price strategies of firms as well as an increased preference among households for low prices. notwithstanding these factors, it is the bank ’ s mandate as the central bank to achieve price stability by addressing them. indeed, no other country in the world is undergoing such a prolonged period of deflation. the government announced, for overcoming deflation and achieving economic revitalization, a “ three - pronged strategy ” – consisting of bold monetary policy, flexible fiscal policy, and a growth strategy that bis central bankers ’ speeches encouraged private sector investment – and swiftly undertook responses including the emergency economic measures. an upturn in stock prices was recently observed, as a positive response to such efforts and in expectation of an economic recovery. of particular significance is the joint statement released this january, in which the government and the bank clearly set their respective tasks and announced their determination to accomplish those tasks with responsibility. this marks a