s research and analysis, and anecdotal information related to firms and financial institutions collected at the head office and branches, as well as read a variety of technical and research papers, both domestic and foreign. in addition, members independently gather anecdotal information, and interview and exchange views with market participants and firms'top management. in this way, policy board members gather information related to the overall economy daily. at mpms, policy board members deliberate on this information gathered through daily research and analysis, and reach a consensus on the appropriate direction for policy. at the meeting, the bank's staff first present oral reports on the current economic and financial situation. these reports are based on the staff's written reports distributed to policy board members at least two business days before the meeting concerned. the written reports include a comprehensive analysis of the economy based on both macro - and microeconomic information obtained during the intermeeting period. the volume of written reports is usually large, and the pages including charts and tables number several hundred. during the two business days prior to mpms, members read through the staff's written reports and formulate their views on the economic and financial situation and the appropriate direction for monetary policy. v. on the day of the mpm a. members and the staff attending the mpm let me describe what happens in the first mpm of the month, which is held over two business days. the first day of the meeting starts at 2 : 00 p. m. the nine members of the policy board gather in the policy board room at the bank's head office, ready to present their views on the state of the economy and the course of monetary policy. pursuant to the new bank of japan law, the minister of finance and the minister of state for economic and fiscal policy may, when necessary, attend and express views at mpms, or they can designate a staff member from the ministry of finance or the cabinet office to attend the meeting. three executive directors of the bank in charge of departments and offices directly concerned with monetary policy, and directors - general and other senior officials of departments and offices concerned, attend mpms to present oral reports. others present at the mpm include the senior official in charge of the bank's external relations and the staff of the mpm secretariat, which arranges proceedings for mpms. b. presentation of the staff ’ s oral reports on economic and financial developments on the first day of the mpm, the staff

about a possible decline in stock prices triggers the aforementioned fallacy of composition. against such a backdrop, the bank has decided to begin exploring specifically the provision of subordinated loans to the banks that are subject to international capital standards. this measure aims at ensuring the smooth functioning of financial intermediation and the stability of japan ’ s financial system, by enabling japan ’ s banks to maintain sufficient capital bases even in severe financial and economic environments. by the measure taken by the bank, financial institutions are provided with three channels to raise capital ; ( 1 ) capital raising by financial institutions through markets, ( 2 ) capital raising based on the act on special measures for strengthening financial functions, ( 3 ) borrowing subordinated loans from the bank. subordinated loans by the bank will work effectively in conjunction with the other two measures to raise capital. in addition, providing such a safetynet measure would enhance the robustness of japan ’ s financial system and the functioning of financial intermediation even under the stressed conditions. for a central bank, this kind of direct provision of quasi - capital funds is an extremely extraordinary measure. however, considering the future stress scenario of the financial system, the bank has judged that, from the standpoint of a central bank, it is necessary to do its best to maintain the smooth functioning of financial intermediation and ensure the stability of the financial system even by conducting this extraordinary measure. the bank expects financial institutions to grasp the thinking behind the measure and to strive to maintain the smooth functioning of financial intermediation with further efforts of boosting capital bases. needless to say, risk management is extremely important for financial institutions, which cannot be emphasized too much. however, under the current circumstances, as i mentioned above, the surfacing of the risk stemming from the fallacy of composition should be avoided. to that end, it is important for the management of financial institutions, while conducting sound business operations, to boost capital bases with envisioning the consequences for japan's economy. the bank also expects financial institutions to pay due concern for the smooth communication with their client companies to convey business policies and lending stances. it is the basic premise that the stability of the financial system should be ensured in order to return to a sustainable economic growth path under price stability. from the standpoint of a central bank, the bank is determined to make its best effort to secure the stability of the financial system. we would appreciate your continued support and cooperation. thank you.