international competition in terms of geography, in that it is located in asia, which is the driving force behind global economic growth. japan also enjoys sophisticated “ soft power, ” as exemplified by the credibility of made - in - japan products and courteous service. moreover, as i mentioned earlier, the great advantage at present is that financial system stability is being maintained in japan, unlike in the united states and europe. the results of various surveys including the bank ’ s tankan ( short - term economic bis central bankers ’ speeches survey of enterprises in japan ) show that the lending attitude of japanese financial institutions has recovered to a level exceeding the average since 2000, despite the strains in financial markets around the world. in the past, japan alone suffered from the disposal of nonperforming loans, and the weakness in the financial sector dragged down economic activity. however, on the back of their sound balance sheets, i believe that japanese financial institutions at present are able to effectively provide support to firms ’ strategic efforts. this embodies the strength of japan. if firms and financial institutions reconcile their growth strategies, they will discover ideas and methods for exploring new markets. iv. the bank ’ s conduct of monetary policy in my remarks today, i first mentioned the outlook for japan ’ s economy and noted that it is likely to return to a moderate recovery path. in terms of points to be kept in mind concerning the outlook, i then talked about the sovereign debt problem in europe and challenges regarding the medium - to long - term growth potential of japan ’ s economy. the bank, in recognition of such outlook and risks, has been pursuing powerful monetary easing under the framework of comprehensive monetary easing ( chart 10 ). this framework has the following three pillars. first, the bank sets the policy rate at 0 to 0. 1 percent, which can be deemed a virtually zero interest rate. second, the bank is publicly committed to continuing this virtually zero interest rate policy until it judges that price stability is in sight. and third, as an exceptional measure for a central bank, it purchases from the markets not only long - and short - term government bonds but also risk assets such as cp, corporate bonds, and exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ). a program for purchasing financial assets, called the asset purchase program, started at 35 trillion yen, but has been repeatedly expanded in size on a significant scale. last week, on october 27, the bank decided to

under pressure. business managers, with little opportunity to raise prices, have moved aggressively to stabilize cash flows by trimming workforces. these efforts have limited the rise in unit costs, attenuated the pressure on profit margins, and ultimately helped to preserve the vast majority of private - sector jobs. to the extent that businesses are successful in stabilizing and eventually boosting profits and cash flow, capital spending should begin to recover more noticeably. such success would likely be accompanied by a decline in elevated risk premiums back to more normal levels and, with real rates of return on high - tech equipment still attractive, should provide an additional spur to new investment. when capital spending fully recovers, its growth is likely to be less frenetic than that which characterized 1999 and early 2000 - - a period during which outlays were boosted by the dislocations of y2k and the extraordinarily low cost of capital faced by many firms. still, the evidence strongly suggests that new technologies will present ample opportunities to earn enhanced rates of return. indeed, reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. many business managers are still of the view, according to a recent survey of purchasing managers, that less than half of currently available new, and presumably profitable, supply chain technologies have been put into use. if the recent more - favorable economic developments continue and gather momentum, uncertainties will diminish, risk premiums will fall, and the pace of capital investment embodying these technologies will increase. as we have witnessed so clearly in recent years, the resulting enhanced growth of productivity will lift our standard of living. the economic and financial developments i have described, of course, have important implications for the federal budget and can help explain a significant portion of the shift in the budget situation over the past year. a year ago, the congressional budget office expected the unified surplus to continue to mount if no new policy actions were taken and to cumulate to $ 5. 6 trillion for fiscal years 2002 to 2011. as you know, if today's policies remain in place, cbo is currently forecasting a cumulative surplus over the same ten years that is $ 4 trillion below what had been anticipated in its baseline a year ago. cbo calculates that the now less favorable economic assumptions - - especially in the near term - contribute nearly $ 1 trillion - -