zero percent or a slight increase toward the end of the year, as the effects of temporary factors, such as the decline in rice prices and the reduction in electricity and telephone charges, fall off. the year - on - year rate of change in the consumer price index ( cpi ) is expected to increase thereafter, as the japanese economy is likely to continue growing at above its potential rate, causing the gap between supply and demand to shrink further. on the financial front, the environment for corporate finance is becoming more accommodative on the whole. the lending attitude of financial institutions has been becoming more active. under these circumstances, the negative year - on - year change in the amount of lending by private banks observed since 1998 has gradually improved, and the amount of their lending is currently at around the previous year's level. the environment in the capital markets for firms raising funds through cp and corporate bonds continues to be favorable. ii. conduct of monetary policy the bank has been providing ample liquidity based on the quantitative easing policy. at the monetary policy meeting ( mpm ) on october 11 and 12, 2005, the policy board decided to maintain the target range for the outstanding balance of current accounts held at the bank at " around 30 to 35 trillion yen. " the framework of the quantitative easing policy is based on two key elements. the first element is the bank's provision of ample liquidity to the money market so that the outstanding balance of current accounts at the bank substantially exceeds the amount of required reserves. the second is the bank's commitment to firmly maintain this ample provision of liquidity until the year - on - year rate of change in the cpi registers zero percent or higher on a sustainable basis. regarding the first element, the bank's provision of ample liquidity contributed greatly to maintaining financial system stability and an accommodative corporate financing environment by responding to financial institutions'precautionary demand for liquidity when there were strong concerns about financial system stability. since then, such concerns have largely subsided, as evidenced by the smooth implementation of the full removal of blanket deposit insurance in april 2005. as a result, financial institutions'precautionary demand for liquidity has been on a declining trend. under these circumstances, since the mpm held on may 19 and 20, 2005, the bank has been allowing the outstanding balance to temporarily fall below the target range when it is judged, in a situation where the bank is doing its utmost to provide funds while at

with the market and an inclusive process of global consultations will allow us to benefit from the experience of others and, more importantly, facilitate more coordinated policy responses and thus support the orderly adjustments to the new standards. while the evolution of financial stability policies over the recent two years has seen clearer mandates being established for the regulatory authorities, the framework for financial stability both at the national and international levels continue to be a subject of intense discussion. the focus has been on the efficacy of policy instruments needed to preserve financial stability, the structure and design of decision making frameworks and the institutional arrangements and accountabilities in regard to financial stability policies. an important part of this is that, with the accountabilities, is the need to have broad range of instruments and the policy space and flexibilities to achieve the specific financial stability policy objectives. in addition to this, for many emerging economies, an important mandate is also to develop the financial system. for most central banks in emerging economies, this developmental role is integral to maintaining the orderly development of the financial system and hence financial stability over the longer term. intensified supervision and strengthened governance the global financial crisis has also prompted a renewal and further strengthening of supervisory approaches, and intensified efforts to deepen supervisory cooperation across borders. this reflects the growing significance of internationally and regionally active financial institutions. although the risk based supervisory approach is already adopted in many countries and provides the framework for enhanced risk assessments with more informed supervisory judgments, the methods used to determine supervisory intensity may need to be regularly re examined given the continuous pace of financial innovation and changing market conditions. as more jurisdictions move to adopt more principle or outcome based approaches to regulation, ensuring rigorous and proportionate supervision, will become increasingly bis central bankers ’ speeches important to ensure prudent risk taking in the financial system. while compliance will remain important, the nature and intensity of supervisory relations with financial institutions are already seeing a more prominent shift towards more open and engaging interactions that allow both supervisors and financial institutions to develop a more complete understanding of risks confronting the institutions and industry as a whole. this also supports current efforts to strengthen the macro prudential orientation to risk management, both at the system and institution level whereby the assessment of institutional risks is complemented by considerations of macroeconomic developments and collective market behaviors that can have a significant impact on financial stability. the reform measures to enhance the resilience of financial institutions and the supervisory capabilities to identify and assess risks at the macro level are also being reinforced with efforts to