the bank will draw up a scheme for implementation as early as possible. as i have just explained, the bank has been implementing various measures in rapid succession since the autumn of last year. the end of the fiscal year is only a few days away, but financial markets in japan have so far remained relatively stable, as firms and financial institutions have strived to secure liquidity in a planned manner at an early stage and the bank has provided large amounts of liquidity at a faster pace than in ordinary years. however, as i explained previously, japan's economic and financial conditions will likely continue to be severe. in this situation, the bank's policy priority will be placed, for the time being, on securing market stability and facilitating corporate financing – the second and third main areas of the bank's conduct of monetary policy. in any event, the bank will continue to examine carefully developments in financial markets and corporate financing and to take necessary measures in a decisive manner without any predetermined view. closing remarks today i explained economic and financial developments at home and abroad and the policy responses of the authorities around the world, including the bank of japan. as i said at the beginning of this speech, the current economic downturn is a process of correcting various imbalances that had accumulated over the past several years, and the severe situation will therefore likely continue for some time. i believe that otaru has also been significantly affected by the global economic downturn, with a sharp drop in exports to russia and a decrease in the number of domestic and foreign tourists. it is also true, however, that both domestic and overseas financial markets, especially money markets, have started to gradually regain stability. furthermore, the effects of major countries'fiscal and monetary policies, as well as measures implemented to secure the stability of financial systems, are expected to be felt gradually. however, we must bear in mind the important fact that these policies and measures can only temporarily mitigate financial and economic shocks and reduce the degree of the economic downturn – in other words, they are merely measures to buy time. resolution of various excesses in the private sector and the subsequent establishment of new business models are indispensable for realizing sustainable economic growth in the medium to long term. fiscal and monetary policies are no more than a support to facilitate adjustments in and the positive efforts of the private sector. japan's economy has been exposed to many severe downturns over the decades, but every time it enhanced its capability

by the u. s. subprime mortgage problem, which surfaced in the summer of 2007. this problem, however, was merely a prominent example of corrections to various financial and economic imbalances that had accumulated. looking back, the world economy enjoyed favorable conditions until a couple of years ago, and unprecedentedly high growth rates of around 5 percent continued from 2004 through 2007. notwithstanding the high growth, prices were generally stable due mainly to an expansion of global supply capacity resulting from the entry of emerging economies into the market economy. amid the high economic growth and low inflation, interest rates worldwide remained low for a prolonged period. in this continued benign environment of high growth, low inflation, and low interest rates with growing optimism about prospects, financial and economic activity overheated and imbalances accumulated. this overheating caused a number of things to happen. for example, the rapid growth of emerging economies significantly increased the demand for resources such as crude oil, and led to a surge in commodity prices. investors and financial institutions eased their credit standards, and a global credit bubble emerged, as seen in the u. s. subprime mortgage problem. looking at developments in final demand on a global basis, not only industrialized economies in north america and europe but also emerging and commodity - exporting economies experienced robust private consumption, particularly of durable consumer goods, and also very strong business fixed investment. these were all indications of the overheating of financial and economic activity. the current global financial crisis and the large economic downturn can therefore be viewed as part of the process of correcting imbalances that had accumulated. these developments suggest that the current financial crisis and economic downturn were essentially caused by the cycle of the generation and bursting of a global credit bubble, or the cycle of the overheating and corrections of financial and economic activity, similar to cycles that occurred repeatedly in the past. looking back over the previous two decades, we can see many boom - and - bust cycles : japan's asset price bubble in the late 1980s, the asian currency crisis in the late 1990s, and the global it bubble in the early 2000s. but the most recent cycle has brought a worldwide economic downturn that is much larger than any in recent history, with distinctive features of " simultaneity " and " rapidity. " i will now describe the background of this simultaneous and rapid downturn of the world economy in terms of three features : the progress of globalization in financial activity ; the progress