next, i would like to discuss the current state of and outlook for japan ’ s economy. amid the global economic downturn that i have just described, japan ’ s economy deteriorated significantly, due mainly to an unprecedented decline in exports and production. thereafter, as overseas economies improved and progress was made in inventory adjustment both at home and abroad, exports and production started to recover. furthermore, as demand for automobiles and electrical appliances, which were subject to tax reductions and subsidies, started to increase, japan ’ s economy bottomed out from around this spring, and can now be judged to be picking up. however, the level of economic activity remains low, signs of improvement have mostly been supported by the government ’ s stimulus measures, and it is judged that there is not yet sufficient momentum for a self - sustaining recovery. turning to corporate financing, you may vividly remember that, around this time last year, issuance in the cp and corporate bond markets was difficult due to the effects of the failure of lehman brothers in 2008, those markets are now showing considerable improvement. in the cp market, issuance rates for cp have declined noticeably and issuance rates for some high - rated cp are even below yields on government bills. the corporate bond market has also been active. in addition to a decline in issuance rates, we have seen a rush in issuance since the summer, while firms have shifted the emphasis of their fund - raising from short - term funds to long - term funds. large firms ’ financial positions have been improving, supported in part by a pick up in their sales and profits and also by a considerable improvement in the issuing conditions for cp and corporate bonds. however, the management at many large companies seem to have not completely loosened the reins about their future financial position despite high levels of liquidity on hand, given their vivid memory of the difficulties experienced since the autumn of 2008 and persistent uncertainties regarding the economic outlook. moreover, the bank is fully aware of the fact that, although policy effects from the government ’ s emergency guarantee program have appeared, the financial position of small firms remains weak, as improvements in their sales and profits are lagging. as such, although japan ’ s corporate financing has been showing signs of improvement, the situation as a whole remains severe. regarding japan ’ s economic outlook, we expect that the pace of improvement will remain moderate up to around the middle of fiscal 2010 as pressure to adjust production capacity and employment is likely to remain. indeed, the pace of economic

saying that one of the bank ’ s most important purposes is ensuring stability in financial markets. i would like to reiterate that the bank will be prepared to act swiftly and decisively if concerns arise that financial market stability might be compromised. while the central banks of major economies, including the bank of japan, have generally addressed the acute problems brought about by the financial crisis, as regards the chronic effects of balance - sheet adjustment they have expressed the intention of maintaining an accommodative financial environment. for example, from autumn to the end of 2008 the bank of japan reduced the policy rate to 0. 1 percent, a level of interest rates of effectively zero. as for the future conduct of monetary policy, the bank has announced that it will maintain the extremely accommodative financial environment and provide consistent support to japan ’ s economy to overcome deflation and return to a sustainable growth path with price stability. at the beginning of december, since there was concern over a risk that international financial developments and instability in the foreign exchange market might adversely affect economic activity through worsened business sentiment, the bank promptly held an unscheduled monetary policy meeting and introduced a new funds - supplying operation in order to further enhance monetary easing. this operation employs the conventional framework of fundssupplying operations against pooled collateral, introduces a fixed interest rate set equal to the extremely low policy interest rate of 0. 1 percent, and provides to the money market ample longer - term funds with a term of three months. the bank plans to provide approximately 10 trillion yen through this operation. we expect that the longer - term money market rates, known as interest rates on term instruments, will decline further, and such effects have already started to appear and the financial markets appear to have regained some stability. moreover, at the monetary policy meeting held in mid - december, the bank clarified again its thinking on price stability. in 2006, the bank introduced what is called an “ understanding of medium - to long - term price stability ” ( hereafter “ understanding ” ), which outlines the bank ’ s understanding of price stability that should be taken into account when discussing monetary policy, and released a numerical expression, a year - on - year rate of change in the cpi that “ falls in the range approximately between 0 and 2 percent. ” this time, in order to prevent the expression “ approximately ” from inviting misunderstanding, we decided to employ clearer words to express the policy board ’ s intention to not tolerate a year