authorities could not come up with effective policy measures in response to successive bank failures and the financial system became extremely unstable, leading to a situation in which firms facing funding difficulties rushed to sell off their own products. in contrast, although japan did face difficult problems, it succeeded in managing to avoid financial system instability due to such measures as ample liquidity provision by the bank of japan. looking at the current phase while bearing those episodes in mind, japan's financial system has been generally stable, and, in terms of cumulative decline in prices, the level of the cpi as of september returned to the level of august 2007, just before the surge in petroleum products started. firms'and households'medium - to long - term inflation expectations are considered to be stable so far, according to various surveys and developments in long - term interest rates. based on those observations, the bank judges that, at present, it is unlikely that the decline in prices will induce downward pressure on economic activity. of course, like the outlook for economic activity, the outlook for prices is also accompanied by uncertainty. as explained earlier, year - on - year changes in prices in japan rose to around 2. 5 percent in the summer of 2008 due mainly to the surge in prices of petroleum products, and this year, because of the base effect, prices have been declining by more than 2 percent, year - on - year. several years ago, there were not many people who could forecast that such changes in prices would take place, including those in the bank and international institutions, as well as economists. as such, it is the reality that the accuracy in predicting price changes during a phase of a large economic swing is not high. therefore, we believe that it is important to maintain a stance of examining all available data, without having any prejudgment about the outlook. the financial environment so far i have explained the developments in economic activity and prices. i will now turn to japan's financial environment. the turmoil in global financial markets since autumn 2008 spread over to japan's financial markets, especially cp and corporate bond markets where large firms raise funds. the issuance rates of cp and corporate bond soared, and the corporate bond market was in an abnormal situation that issuance virtually stopped. together with a deterioration in economic activity, funding conditions of large firms became increasingly tight. the worsening financial environment for large firms affected funding conditions at small firms mainly through two channels. first, since large firms that faced malfunctioning

of a bubble will eventually boil down to the human nature such as bullish expectations in a benign financial and economic environment or a decline in self - discipline against risks. that itself raises a difficult issue of how a central bank should deal with such an elusive problem. i have discussed earlier the dollar carry trade, and the fact that people are able to easily take risk without geographical and time constraints, thanks to the recent financial and economic globalization and progress in information technology, has made the responses of a central bank all the more difficult. what is obvious is that a crisis will always come in a new form. by exchanging views with the policy authorities at home and abroad, market participants, and academics, and continuing to learn humbly, the bank of japan will meet such new challenges. thank you.