parallel with a recovery in profits. moreover, firms continue to reduce debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks ’ lending remains sluggish. issuance of corporate bonds and cp has been steady. money stock ( m2 + cds ) grew slower in may compared with the previous month on a year - on - year basis. in this financial environment, corporate financing conditions are easing, and the lending attitude of financial institutions is perceived by firms as less severe. it continues to warrant careful monitoring how these favorable developments in corporate financing environment will affect economic activities.

bank of japan ’ s june report of recent economic and financial developments1 bank of japan, communication, 14 june 2000. * * * the bank ’ s view2 the improvement in japan ’ s economy is becoming distinct. recovery has been observed in some areas of private demand, with business fixed investment continuing to increase. with regard to exogenous demand, net exports ( real exports minus real imports ) continue to follow an upward trend due to steady developments in overseas economies, and public investment is picking up reflecting the progress in the implementation of the supplementary budget for fiscal 1999. as regards domestic private demand, housing investment is on a moderate declining trend, and the recovery in private consumption continues to be weak through lack of notable improvements in employment and income conditions. meanwhile, business fixed investment is increasing. reflecting such developments in final demand, industrial production is increasing, and corporate profits and sentiment continue to improve. firms as a whole still strongly feel that they have excess capacity and employees, and that they should reduce their debts to restore financial soundness. nevertheless, the number of firms that take positive action, such as increasing the amount of fixed investment, has been increasing, especially in high - growth sectors. regarding employment conditions, although the decrease in the number of employees and in wages is slowing, efforts by firms to reduce personnel expenses have prolonged the severity of households ’ income conditions. as for the outlook, public investment is likely to increase for some time. this, along with the favorable financial environment created partly by the bank ’ s monetary easing, is expected to continue underpinning the economy. moreover, net exports are likely to follow an upward trend reflecting the recovery of overseas economies, and it is also highly probable that business fixed investment will increase gradually with an improvement in corporate profits and sentiment. however, housing investment is expected to decline for the time being. while there seems to be no substantial change in firms ’ stance to reduce personnel expenses, an improvement in households ’ income conditions, which should support private consumption, is likely to be moderate at the most. in addition, since firms ’ prospects for sales remain modest, careful monitoring is still required to determine whether the recovery in business fixed investment is sustainable and whether it is likely to spread to a wider range of industries. with regard to prices, import prices are decreasing slightly, reflecting a temporary decline in international commodity prices such as crude oil prices. domestic wholesale prices, notwithstanding the fall in prices of electric machinery, are unchanged mainly due to the rise in prices of petroleum