bank of japan ’ s february report of recent economic and financial developments1 bank of japan, communication, 15 february 2000. * * * the bank ’ s view2 japan ’ s economy has recently started to improve. the economic environment surrounding private demand is gradually improving, as seen in the continuing increase in corporate profits. however, clear signs of a self - sustained recovery in private demand have not been observed yet. with regard to final demand, housing investment has peaked out and started to decline slowly, and public investment seems to be decreasing moderately. recovery in private consumption continues to be weak with the decrease in income, particularly in winter bonuses. business fixed investment, which had been on a downward trend, is starting to level off. meanwhile, net exports ( real exports minus real imports ) continue to follow an upward trend, despite monthly fluctuations, due to an upturn in overseas economies. reflecting such developments in final demand and progress in inventory adjustment, industrial production continues to rise and an increase in corporate profits is becoming distinct. in this situation, corporate sentiment continues to improve. regarding the employment condition, the decrease in the number of employees is gradually slowing. however, the improvements in corporate profits and sentiment have not stimulated business activities of many firms, because these firms still strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. in addition, efforts by firms to reduce personnel expenses have prolonged the severity of households ’ income conditions. as for the outlook, improvements in the overall financial environment partly due to the monetary easing by the bank, along with a series of economic measures taken by the government, are expected to continue underpinning the economy. moreover, the positive impact on domestic production of the recovery of overseas economies is likely to continue for some time and have favorable effects on corporate profits and then on household income. by contrast, it is highly probable that housing investment will continue to decline slowly, and public investment is expected to follow a moderately downward trend for some time. in the corporate sector, restructuring is gradually improving profitability to some extent and some firms in high - growth sectors are inclining toward increasing capital spending. many firms, however, are very likely to maintain a cautious stance toward fixed investment based on their modest prospects for sales. it seems that the appreciation of the yen since the summer of 1999 will have an adverse effect on corporate profits in the near term. in these circumstances, future economic developments still require careful monitoring in spite of the gradual recovery in the

- frank act requires companies with between $ 10 and 50 billion in assets to conduct an annual company - run stress test. the federal reserve does not conduct a ccar - like exercise to evaluate these company - run stress tests, although we do review the firms ’ company - run stress tests and capital planning processes in the normal course of supervision. this review is tailored to the smaller size, reduced complexity, and limited systemic risk of these firms. see footnote 5, p. 14160, of board of governors of the federal reserve system, federal deposit insurance corporation, and office of the comptroller of the currency ( 2014 ), “ supervisory guidance on implementing dodd - frank act company - run stress tests for banking organizations with total consolidated assets of more than $ 10 billion but less than $ 50 billion, ” final supervisory guidance ( docket no. occ – 2013 – 0013 ), federal register, vol. 79 ( march 13 ) ( pdf ). for other, smaller banking organizations – those with $ 10 billion or less in total consolidated assets – there is no supervisory expectation or regulatory requirement that these firms will conduct capital stress testing. bis central bankers ’ speeches we have already taken steps to further this integration of ccar and regular supervision. at the end of each ccar process our supervisors send to each firm a letter detailing their conclusions concerning the qualitative assessment. to the extent weaknesses or areas for improvement are identified, those letters provide a basis for regular stocktaking by both firms and supervisors. more generally, last year we released a paper on our expectations for all aspects of capital planning, providing greater detail than what is included in the annual ccar instructions. 14 i anticipate that we will take additional steps to integrate ongoing supervisory assessments of risk - management and other internal control processes with the annual ccar exercise, and to assure that communications in both directions are heard. one such step has just recently begun : the committee chaired by senior board staff that is responsible for the oversight of ccar, supported by the relevant horizontal assessment teams, will directly engage with firms during the course of the year to evaluate progress in remediating weaknesses or other issues identified in the post - ccar letters. increasingly, our regular supervisory work on topics such as risk - identification and internal audit will focus on processes that are critical to risk management and capital planning at the firms, areas of focus for ccar. the aim of these and additional measures is to make ccar more the culmination of