bonds and corporate bonds ) and government bonds remain virtually unchanged. stock prices continue to be weak reflecting the uncertainty about the domestic economic outlook. the nikkei 225 stock average is recently moving at around 8, 500 yen. in the foreign exchange market, the yen fell back slightly toward the end of january as market participants became sensitive to market intervention by the authorities, while the u. s. dollar has been weakening on the whole mainly due to the strained situation in the middle east. the yen is currently traded in the range of 120 - 122 yen to the u. s. dollar. with regard to corporate finance, private banks remain cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms, particularly small ones, are severe. in the corporate bond and cp markets, the issuing environment for firms with high credit ratings is accommodative, but the environment for firms with low credit ratings is severe. credit demand in the private sector continues to follow a downtrend mainly because business fixed investment remains sluggish and firms are continuously reducing their debts. amid these developments, private banks ’ lending continues to decline by about 2 - 3 percent on a yearon - year basis. the amount outstanding of corporate bonds and cp issued is moving at around the previous year ’ s level. meanwhile, according to business surveys, the financial position of firms, particularly that of small firms, remains severe. the year - on - year growth rate of the monetary base dropped to around 10 - 15 percent in january. the year - on - year growth rate of the money stock is at around 2. 0 percent. funding costs for firms continue to be at extremely low levels on the whole. against the above background, the financial developments are summarized as follows. money market conditions continue to be extremely easy. long - term interest rates remain at low levels. the money stock and the monetary base maintain high growth rates relative to that of economic activity as a whole. however, stock prices remain weak. in corporate finance, the fund - raising environment of firms with low credit risks is accommodative on the whole, but with regard to firms with high credit risks, the stance of investors is severe and the lending attitudes of private banks continue to be cautious. developments in the financial and capital markets, the behavior of financial institutions, and the situation of corporate finance continue to require close monitoring.

that for japan ’ s economy it is important to both reap the fruits of global economic growth and to lay the groundwork for expanding domestic demand. the second point that i think is important in overcoming deflation is the need to establish a supply system that corresponds to potential demand and thereby raise productivity. in order to make the most of the demand from expanding new markets in emerging and developing economies, we need to change the goods supplied and the supply system by taking into account the characteristics of individual markets. if we are able to provide goods and services that meet potential demand, sales will increase and consequently productivity will rise. while discussions of “ productivity ” typically refer to producing existing products efficiently, unlocking potential demand and establishing the necessary supply system also raises productivity. what is important, therefore, are efforts by firms to adapt existing human and management resources to new markets in order to link potential needs with actual demand. moreover, in order to support such efforts at the firm level, it is critical to review systems and mechanisms so as to ensure the flexibility of japan ’ s economic structure in response to changes in the economic environment at home and abroad. for example, both firm entry rates and firm exit rates in japan are about 5 percent, which is roughly half of the corresponding rates in the united states, suggesting that japan ’ s economic metabolism is low. while there is not enough time today to go into this in detail, to improve this situation and create a mechanism in which productive resources are smoothly transferred to areas where there is a strong need for them, the role of financial markets is also important. in addition, the necessary social safety net should be put in place to deal with adverse effects arising during the process. these are two of the issues i think are important to raise the potential growth rate of japan ’ s economy. looking back at japan ’ s economy in the past, we have a record of overcoming difficulties and achieving prosperity through people ’ s wisdom and efforts. to truly bring japan ’ s economy back onto a sustainable growth path, proactive efforts such as the ones i just mentioned are essential. while the process of putting such efforts into practice will not be without pain, it is unavoidable given the drastic economic changes taking place on a global basis. in this regard, what somewhat worries me is the recent mood of pessimism that fails to recognize the strengths of japan ’ s economy. for example, while japan ’ s financial system has remained relatively stable during the recent crisis, this fact seems