reforms to the government ’ s tax policies and spending priorities that serve not only to reduce the deficit but also to enhance the long - term growth potential of our economy – for example, by encouraging investment in physical and human capital, by promoting research and development, by providing necessary public infrastructure, and by reducing disincentives to work and to save. we cannot grow out of our fiscal imbalances, but a more productive economy would ease the tradeoffs that we face. thank you. i would be pleased to take your questions. bis central bankers ’ speeches

, particularly in the non - manufacturing sector, but also to keep a close eye on the extent to which companies ’ views regarding the economic outlook become more bullish as the recovery continues. outlook for prices and the conduct of monetary policy the japanese economy has been in a recovery phase since the summer of 2003. domestic corporate goods prices have been rising partly due to high crude oil prices. consumer prices, however, have been on a slightly declining trend due to the fact that the rise in corporate goods prices has mostly been offset by higher productivity and labor cost restraint. the bank has been providing ample liquidity in accordance with its commitment to continuing with the quantitative easing policy until the year - on - year rate of change in the consumer price index ( excluding fresh food prices, on a nationwide basis ) registers zero percent or higher on a sustainable basis. the positive impact of the commitment on the economy, acting via interest rates, has increased as the economic recovery has progressed. this impact is expected to become stronger as corporate profits continue to increase in line with the economic recovery. the bank ’ s thinking on the future conduct of monetary policy was explained in the outlook for economic activity and prices published in october 2004. the bank said that if higher productivity and other factors continue to broadly contain the upward pressure on prices as the economy follows a sustainable and balanced growth path, this will give the bank more latitude in conducting monetary policy. here, the “ conduct of monetary policy ” includes monetary policy decisions relating to the timing of the termination of the current monetary policy framework and the pace at which the bank will raise short - term interest rates to keep them consistent with economic conditions at the time. if prices remain less responsive to increased economic activity, the bank can more flexibly and effectively respond to emerging economic situations. for example, it could choose to continue with the quantitative easing policy as long as possible, or it could choose to raise interest rates at a moderate pace after the termination of the policy. whatever policy option is chosen in the future, it seems unlikely that the bank will be required to take precipitate action. it is in this sense that it enjoys “ latitude ” in making monetary policy decisions. as an end to the quantitative easing policy approaches, the bank will further endeavor to offer a lucid explanation of its assessment of the economic situation as well as the thinking behind its conduct of monetary policy. furthermore, the bank will continue to enhance its communication with market participants so that they will be better able to predict the conduct of