of the economy, firms ’ returns on investment are expected to increase, and the current quantitative easing policy will therefore further promote their positive activity. the effects of the quantitative easing policy will support the economy more strongly as it continues to recover. with these points in mind, the bank has continued to conduct its quantitative easing policy with the commitment based on the cpi. the bank has been making efforts to make credit intermediation in the market more diversified and efficient so that monetary easing effects permeate further throughout the economy, and these efforts are expected to improve the japanese capital market in the long term. as part of such efforts, the bank started to purchase asset - backed securities ( abss ) from july 2003, and the total amount of abss purchased to date has reached around 800 billion yen. in addition, the bank hosted the workshop on securitization, and exchanged views about practical problems and possible solutions with market participants to back the development of the abs market. in april 2004, the bank released the results of the discussions held at the workshop, which contained specific proposals, for example, a proposal that prices of securitized products should be evaluated more accurately and efficiently. in may, the bank introduced a facility which provides the markets with japanese government securities ( jgss ) held by the bank as a secondary source with a view to enhancing the liquidity of jgs markets. the bank has been making a wide range of efforts to improve the infrastructure of financial markets and will continue to do so. iii. purchases of stocks held by commercial banks the bank started to purchase stocks held by commercial banks from november 2002 to reduce the risk that stock price fluctuations might impact negatively upon the business management of individual financial institutions, potentially resulting in instability of the financial system as a whole. the total amount of stocks purchased by the bank as of may 31, 2004 was 1, 979. 9 billion yen. conclusion japan ’ s economy is expected to continue recovering as it gains further momentum gradually. to ensure that this recovery will become sustainable and to overcome deflation, the bank considers it essential that a wide range of economic entities continue to make efforts to revitalize the economy. the bank is determined to firmly support japan ’ s economy by continuing with monetary easing even as the economy continues to recover, in order to realize sustainable growth and overcome deflation.

faster from the effects of the fall in crude oil prices in addition to the continuous decreases in prices of electrical machinery and materials. consumer prices are weakening owing mainly to the decline in prices of imported products and their substitutes. corporate service prices continue to decrease. as for the conditions surrounding price developments, crude oil prices remain weak. also, as the economy will continue to deteriorate, the balance between supply and demand in the domestic market will increasingly exert downward pressure on prices. furthermore, in addition to the declining trend of machinery prices caused by technological innovations, the decreases in the prices of goods and services reflecting deregulation and the streamlining of distribution channels will continue to restrain price developments. overall, prices are expected to follow a gradual declining trend for the time being. moreover, given the high degree of uncertainty regarding future economic developments, the this report is based on data and information available at the time of the bank of japan monetary policy meeting held on december 18 and 19, 2001. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on december 18 and 19 as the basis for monetary policy decisions. possibility that weak demand will further intensify downward pressure on prices warrants careful monitoring. in the financial market, the overnight call rate is moving around zero percent as the bank of japan provided ample liquidity to the money market by aiming at maintaining the current account balances held at the bank at above 6 trillion yen. interest rates on term instruments basically continue to be level. the japan premium remains negligible. yields on long - term government bonds are virtually flat, and are mainly moving around 1. 35 percent recently. as for the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds, while spreads between bonds with relatively high credit ratings and government bonds remain mostly unchanged, those between bonds with low credit ratings and government bonds continue to expand slightly. stock prices are weakening recently. in the foreign exchange market, the yen is currently being traded in the range of 127 - 129 yen to the u. s. dollar, moving around the lowest level for this year. with regard to corporate finance, private banks appear to be more cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms are becoming more cautious. in corporate bonds and cp markets, the fund - raising conditions continue to