its impact on domestic and overseas economies continue to warrant attention. in addition, there are extremely high uncertainties over how the situation surrounding ukraine will affect japan ’ s economic activity and prices, mainly through developments in global financial and capital markets, commodity prices, and overseas economies. japan ’ s financial system has maintained stability on the whole, despite the pandemic. regarding financial risks from a longer - term perspective, there is a possibility that prolonged downward pressure on financial institutions ’ profits may lead to a gradual pullback in financial intermediation. meanwhile, the vulnerability of the financial system could increase, mainly due to the search for yield behavior. although these risks are judged as not significant at this point, it is necessary to pay close attention to future developments. ii. conduct of monetary policy next, i will explain the bank ’ s conduct of monetary policy. 1 / 2 bis central bankers'speeches japan ’ s gdp has remained below the pre - pandemic level. although the year - on - year rate of change in the cpi is likely to increase clearly in positive territory in the short run, this is expected to occur mainly due to an increase in energy prices. inflation resulting from higher import costs could push down japan ’ s economy through a decline in households ’ real income and deterioration in corporate profits. given such developments in economic activity and prices, the bank will persistently continue with the current powerful monetary easing centered on yield curve control, aiming to firmly support japan ’ s economic activity, which is on its way to recovery from the pandemic, and thereby achieve the price stability target of 2 percent in a sustainable and stable manner. on this basis, while closely monitoring developments at home and abroad, the bank will continue to ensure stability in financial markets through, for example, providing ample liquidity ; it will also continue to do its utmost to support financing, mainly of small and medium - sized firms, by providing funds through the special funds - supplying operations to facilitate financing in response to the novel coronavirus ( covid - 19 ) at a low interest rate to financial institutions that make loans in response to covid - 19. thank you. 2 / 2 bis central bankers'speeches

bank of japan ’ s december report of recent economic and financial developments1 bank of japan, communication, 18 december 2000. * * * the bank ’ s view2 japan ’ s economy continues to recover gradually, albeit at a somewhat slower pace due to decelerating export growth. with regard to exogenous demand, public investment is decreasing gradually since the implementation of the supplementary budget for fiscal 1999 has peaked out. net exports ( real exports minus real imports ), which had been increasing, are starting to level off as inventories of some raw materials and electronics parts became somewhat excessive in east asian economies. as regards domestic private demand, business fixed investment is on an increasing trend. the recovery in private consumption continues to be weak as a whole through lack of notable improvements in employment and income conditions, although there are somewhat positive signs in some indicators. housing investment is declining slightly. reflecting such developments in final demand, industrial production remains on a rising trend although the pace is somewhat slowing. corporate profits continue to improve, and the number of firms that take positive action, such as increasing the amount of fixed investment, is rising, especially in high - growth sectors. income conditions of households still remain severe, but regular and overtime payments as well as new job offers continue to increase in line with the recovery in corporate activities, and compensation of employees has stopped decreasing. as for the outlook, public investment is expected to maintain the current level for the time being, but is likely to start increasing again in the future along with the implementation of the new economic stimulus package by the government. while the u. s. economy is decelerating gradually, the expansion in overseas economies is projected to continue, albeit at a slower pace. in these circumstances, exports are likely to remain level for the time being mainly due to inventory adjustments in east asian economies. meanwhile, imports are projected to continue increasing, particularly for those of consumer goods, and capital goods and parts. therefore, net exports will decline slightly for a while. in the corporate sector, firms still strongly feel that they have excess equipment and that they should reduce their debts to restore financial soundness. however, it is very likely that fixed investment in high - growth sectors, including those related with information technology services, will increase as corporate profits continue to recover. moreover, an improvement in corporate profits will increase household income and this in turn is expected to boost private consumption. however, the pace of recovery in household income will be modest for the time being, since firms ’