new industries that will lead the economy in the 21st century with high productivity and value - added that are suitable to a developed nation. such efforts are indispensable to ensure economic prosperity in the future, since we will not be able to count on an increase in the population as a source of economic growth and an improvement in productivity is virtually the only way to create growth. at the same time, it is necessary to drastically reconstruct the socioeconomic system, which has been based on an expanding economy, into one fitted to a mature economy. it is very difficult to achieve a national consensus regarding changes in the system itself. if the changes in the socioeconomic system cannot catch up with the actual economic and social developments, however, economic revitalization will be hampered through the effects of the disincentives. there is another problem regarding private economic entities : the risk - taking capability of financial institutions and firms is impaired because of the sluggish growth expectation after the bursting of the bubble. this problem undermines the effect of various policy actions. therefore, the efforts of the government, the private sector, and the central bank must be concerted to overcome such complex issues facing the economy. as part of this, japan should present a vision of the future socioeconomic system it seeks to attain, including the social security system and the relationship between the central and local governments, and seek to continuously take actions in accordance with this vision. japan ’ s prosperity in the 21st century should be achieved through maximum utilization of privatesector initiatives and market mechanisms, as for example an investment and funds intermediary, throughout the economy. at present, the private sector cannot fulfill the role to the utmost because of its limited financial strength, and in some cases public authorities are required to support privatesector initiatives. the industrial revitalization corporation of japan established last month is a major example of a public initiative to support private activities, and i hope it will be utilized effectively and contribute to the revitalization of the economy. at the same time, such policies and support as a whole must be in line with the nation ’ s vision, that is, an economy exploiting the full benefits of private - sector initiatives and market mechanisms. continuing to take these policy actions in harmony with the future visions will heighten the growth expectation of the private sector and induce demand. b. reviving the financial system finally, i would like to comment more specifically on issues concerning the japanese financial system. in order to revive

features of japan ’ s financial structure, contributed to absorbing shocks from the downturn in economic activity within banks ’ assets, and thus succeeded in diminishing their effects on the economy as long as the impacts of the shocks were limited. however, when significant shocks such as those accompanying asset price falls occurred, the concentration of the loss to the banking sector caused substantial damage to its capital base and risktaking capability. this, in turn, amplified the effects of the shocks through tightening of corporate financing conditions. this problem could be partially resolved if alternative financial markets substituting for bank lending were developed to a significant degree. the development of such markets would not only contribute to smooth corporate financing, it would also work as a discipline on banks ’ lending activities, for example, by encouraging banks to formulate lending rates which reflect credit risks more accurately. in addition, broadening the scope of economic entities that take credit risks attached to the corporate sector could enlarge the risk - taking capacity of banks. investors would be able to realize portfolios by utilizing a broader range of instruments with various combinations of risks and returns. a new financing channel of this kind is imperative to cope with the financing needs of the corporate sector, as the economy becomes mature. based on this thinking i have described, this april the bank started examining the policy option of temporary purchase of abss with underlying assets such as receivables and loans related to small to medium - sized firms. the bank decided the purchasing scheme at the monetary policy meeting on june 11, 2003, taking into account various comments from market participants. although it is an unconventional measure for a central bank to directly take on private - sector credit risk, we thought it necessary to promote smooth corporate financing by nurturing the abs market and to enhance the effectiveness of monetary easing, giving due consideration to the required functions of japan ’ s financial system in the future and the current weakness in the credit intermediary function of the banking system. at the same time, the bank will pay careful attention to avoid distortion of the abs market and to maintain the soundness of the bank ’ s balance sheet. iv. for the revitalizing of japan ’ s economy a. the need for efforts by a wide range of economic entities i would like to briefly discuss my thinking on the efforts necessary to revitalize japan ’ s economy. as i mentioned at the outset, the world economy is undergoing structural change and industrialization in emerging economies is advancing. in this situation, japan should foster