fixed investment. however, such cases are still limited, with a large number of firms placing priority on reducing interest - bearing liabilities by using their increased profits, and taking a " wait - and - see " attitude toward investment commitments. although many firms are increasing business fixed investment, this is being kept within the limits of their cash flow. as pointed out earlier, firms have been cautious about increasing inventories during this recovery phase. the persistent decline in bank lending is also indicative of firms'hesitancy about making forward - looking commitments. firms became concerned about business risk and financial risk management, having experienced highly volatile economic conditions during the 1990s and financial system instability during the second half of that decade. their incentives to reduce interest - bearing liabilities and increase their capital bases as much as possible are therefore understandable. expanding business lines is not so easy for firms in the current situation where, faced with price - sensitive consumers, they have difficulty in raising product prices in order to pass on the rise in materials and intermediate goods prices caused by the surge in commodity prices at home and abroad. there may also exist some concern about the impact of changes in the economic environment, such as those caused by the low birth rate and rapidly aging society. however, corporate management will not continue to appeal to uncertainty about the economic outlook to justify its hesitancy in making positive commitments for long. amid rapidly changing technology and increasing competition, firms know that they need to maintain high profitability in the medium term by continuously and swiftly reallocating their management resources while continuing to invest in highly profitable areas. the economic environment surrounding firms is now well suited to encourage such commitments. in the labor market, deregulation and changes in people's attitudes and lifestyles have combined with firms'need to adapt to changes in the industrial structure and to improve profitability, with the result that the number of non - regular employees has increased. although indicative of firms'unwillingness to commit themselves to hiring longer - term regular employees, such developments, in so far as they illustrate the increased flexibility of the labor market, also suggest that firms have become better able to adapt to change. in addition, some firms have started to invest in highly profitable areas. they have been studying consumer needs so as to provide attractive new products and new services, and this has contributed greatly to private consumption, which has continued to be firm despite sluggish growth in income. a breakdown by household spending behavior shows that spending is increasing in a wide range of

##y of banks ’ business functions, especially in the bank / non - bank spectrum. the difference is not arbitrary but reflects real structural differences between regions. in particular, it would be unrealistic to always assume that “ one size fits all ” : we should not put carnivorous lions and herbivorous elephants in the same cage. we should also follow a well - balanced approach that properly recognizes the synergetic cross - effects of item - by - item regulations. an appropriate criterion should be the combined effects of all item - by - item regulations. simply focusing on the “ marginal effects ” of individual measures may be misleading, even though they have good individual rationale. at the same time, we should be aware of a possible trade - off between the long - term benefits and short - term costs of stronger regulations. such regulations may indeed enhance financial stability and economic prosperity in the long run, but the hasty implementation of stringent regulations may hamper a fragile recovery, such as we find ourselves in now. let me stop here for further discussion. thank you for your kind attention.