##shing slightly. as growth of banknotes in circulation is on a downtrend due mainly to decreasing anxieties about the financial system, the year - on - year growth rate of the monetary base is moving around 15 percent. the year - on - year growth rate of the money stock is at the 1. 0 - 2. 0 percent level. as for developments in financial markets, money market conditions continue to be extremely easy, as the bank of japan provides ample liquidity. in the foreign exchange and capital markets, while the yen ’ s exchange rate against the u. s. dollar is rising somewhat from the previous month, stock prices are declining slightly. long - term interest rates are around the same level as last month. this report is based on data and information available at the time of the bank of japan monetary policy meeting held on february 4 and 5, 2004. the bank's view was determined by the policy board at the monetary policy meeting held on february 4 and 5, 2004.

, i think it is fair to say that japan ’ s financial system is on track to restore its soundness and stability. in addition to tackling of the npl problem, reforms have been implemented in various areas such as accounting, taxation, and bankruptcy laws, and a framework has been established for improving corporate governance. the rules and practices that have been supporting economic growth in japan up to recent years have emphasized long - term relationships among firms as well as between firms and banks, based on the assumption that high growth would continue. these rules and practices enabled firms to expand their business over the long term while absorbing moderate economic shocks. nonetheless, they are no longer adequate to address the problems resulting from the everchanging nature of today ’ s global economy. we have made substantial progress in reforming the rules and practices that used to support the economy but had grown obsolete. without such progress, we might never have been able to reach the point where we now stand : on the verge of achieving a solid footing for the revitalization of our economy. the more than ten years following the bursting of the bubble have often been termed the “ lost decade ”. they were longer than expected, but may have been necessary to achieve the step - by - step reforms. b. roles of financial services in the future we must keep forging ahead because, from now on, both firms and financial institutions will need to continuously improve their competitiveness to create new business value. firms ’ operating environments are changing significantly. for example, competition from emerging economies has intensified, and rapid progress in it has reduced the life span of existing competitive strengths by lowering the barriers of time and geography. japanese businesses have been making great efforts to survive this tidal wave of structural change. their performance depends on not only business activities, such as the development of new goods and services as well as company - wide increases in productivity, but also financial activities, such as reduction of funding costs and control of market - and payment - related risks. we can also observe changes in the financial needs of households. the diversification of employment and rapid aging of the population have been significantly affecting how people, both young and old, plan their lives. this is evidenced by the fact that pension reform became a major issue in the recent election for the house of councillors. such a change in the attitude of households has inevitably come to influence their financial activities such as choices of asset investment, life insurance, and consumer loans. demand for financial services has grown quite diversified among differing