can be partly attributed to the bank ’ s highly stimulative monetary policy, which i touched upon earlier. shifting our focus to the second stage of the transmission of monetary policy, unfortunately even an extremely accommodative financial environment has not led to an active increase in investment and spending by private economic agents. this is in fact a prime source of concern for the bank as well as japan ’ s economy. as a response to this situation, some believe that economic activity would eventually be stimulated if the bank took further drastic measures. in reality, however, interest rates in japan, particularly actual funding rates for private economic agents, have continued to ease and are the lowest among advanced economies. as for quantitative indicators, the monetary base – funds provided by the central bank – and money stock – funds possessed by households and firms – relative to nominal gdp indicate that the amount of fund provision in japan is the largest among advanced economies, far exceeding the amounts in the united states and the euro area ( chart 8 ). while the united states substantially increased its amount of fund provision after the lehman shock, japan conducted such aggressive fundprovisioning at an earlier stage given that it experienced a financial crisis at an earlier stage. this may explain why the bank ’ s active efforts may not be so noticeable. nonetheless, the hard fact based on data is that japan ’ s monetary base relative to nominal gdp already bis central bankers ’ speeches attained in 2002 the level currently reached by that of the united states, and has been rising further over the past several years. although the bank continues to enhance monetary easing, given the accommodative financial environment surrounding japan that i have described, it is more important to make efforts to take advantage of such conditions – namely, efforts aimed at strengthening the economy ’ s growth potential. i will discuss this in more detail later, but before that let me turn to the effect of and responses to the yen ’ s appreciation, which is closely connected to this issue and is considered a matter of grave concern among people in this region. iii. responses to the yen ’ s appreciation regardless of whether a currency is appreciating or depreciating, the impact of foreign exchange rate fluctuations is highly significant for business, for local economies where businesses cluster, and for the national economy as a whole. looking back, the yen was on a significant depreciation trend toward the middle of the 2000s, which was followed by a period of significant appreciation. the current appreciation of the yen

be seen as “ back to basics ” of financial operations has been occurring in the united states and europe. proprietary trading of complex products, such as securitized products and derivatives, has complicated the risk profiles of financial institutions and made risks difficult to manage. based on such recognition, a move to return to the traditional business based on customer transactions has been emerging. the move includes a re - evaluation of traditional businesses related to deposits and payment and settlement while taking into account a viewpoint of improving the management of liquidity risk. those businesses are, so to speak, the areas japanese financial institutions have been good at. one question for financial institution management in japan is whether the costs associated with maintaining deposit bases are commensurate with the profits. retail banking is associated with a variety of unique factors that lead to an increase in costs, including atm that operates 24 hours. meanwhile, to charge fees for the current deposits whose balance dropped below the required minimum balance is not gaining customers ’ understanding. while how to balance the costs and profits is an important management judgment, it would be absolutely necessary for financial institutions to avoid the possibility of running below break - even. as financial institutions are expected to provide fine - tuned services to households reflecting their outstanding balance of deposits and the degree of use of services, it would be necessary to check the balance between the quality of services and the cost sharing. in addition, if one assumes a situation in which households ’ asset accumulation further progresses and their asset management diversifies, it would be essential to enhance the services to support households ’ asset management. such services are currently provided in the form of over - the - counter sales of mutual funds and insurance, and asset management services. by properly gauging the needs of customers and enhancing the provision of services, i believe it important that the fee business steadily takes root. personal loans second, the role of personal loans. in japan, housing loans have overwhelming weight and accounts for about 20 percent of the financial institutions ’ total lending. housing loans in japan have been increasing steadily even under the current financial crisis. the problem is its profitability. according to the bank ’ s analysis, the profitability of japanese financial institutions ’ housing loans has been consistently declining recently. for example, if the profitability of housing loans during the life of a loan that was lent in fiscal 2003 and fiscal 2007 is compared on a present value basis, it will decline by about six percentage points. if the default rates rise significantly in the future, it cannot be