” may drive our economy into shrinkage. of course, there are factors that will work positively on the economy. the point is, however, whether these factors are strong enough to outweigh the negative ones mentioned above. let me discuss the positive factors in detail. first, corporate restructuring may bring about a recovery in corporate profits – and may push up stock prices in anticipation of such a recovery. for the recent corporate restructuring to have a positive effect, the profits recovery should boost firms ’ spending sufficiently to outweigh workers ’ saving. the second positive factor is that the effects of the government ’ s various measures to ensure the stability of the financial system and the bank of japan ’ s monetary policy to ease financial conditions are permeating throughout the economy, improving household and corporate sector confidence somewhat. furthermore, there is a possibility that this improved confidence will stimulate the spending attitude of consumers and firms. in fact, household consumption has held steady even amid the harsh income conditions. however, corporate expenditure is still weak, as is obvious from the tankan survey on business fixed investment plans. while financial institutions are improving their skill in risk management and striving for adequate lending margins, bank loans have not increased while demand for fund raising remains weak. the third positive factor is a recovery in overseas economies, especially in asia. although china ’ s economy is decelerating somewhat, korea is now on a recovery trend. thailand and the philippines as well as malaysia and singapore are bottoming out gradually. these developments will facilitate japanese exports and production. the above arguments make obvious the following fact : if foreign economic factors are not considered, the recovery of the japanese economy depends largely on when corporate behavior becomes active. the recent improvements in corporate sector confidence are good signs for the economy, but other economic indicators and fixed investment plans show no significant signs of economic recovery. our judgment is that it is too early to say that the japanese economy is on the way to a self - sustained recovery. therefore, the downward pressure on prices will remain, although prices have been stable recently. it is in view of such economic conditions as those described above that the bank of japan will maintain the current monetary easing stance and continue to firmly support economic activities until deflationary concerns subside. iii. contained dynamism of the japanese economy a caveat regarding fiscal and monetary policies is that they are effective in managing the economy in the short run, but are not a panacea for all of the problems the japanese economy faces.

regarding the pace of recovery in overseas economies. in addition, domestic demand continues to be weak for some time. consequently, it will take quite a while for the economy as a whole to stop declining evidently. while the economy continues to be in a fragile state, continuous attention should be paid to the fact that unstable movements in the foreign and domestic financial markets are apt to have a negative impact on the real economy. with regard to prices, import prices are increasing reflecting the depreciation of the yen since around the end of last year and the rise in international commodity prices. the decline in domestic wholesale prices is contracting against the background of the increase in import prices and the progress in inventory adjustment. consumer prices continue to decline with the persisting effects of the fall in crude oil prices in the latter half of last year, while the prices of imported products and their substitutes keep on falling. corporate service prices continue to decline. as for the conditions surrounding price developments, the depreciation of the yen from around the end of last year and the rise in international commodity prices including crude oil are regarded as factors to this report is based on data and information available at the time of the bank of japan monetary policy meeting held on april 10 and 11, 2002. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on april 10 and 11 as the basis for monetary policy decisions. support prices for the time being. however, since domestic demand is projected to remain weak for a time, the balance between supply and demand is expected to keep exerting downward pressure on prices. furthermore, factors such as the ongoing technological innovations in machinery, deregulation, and the streamlining of distribution channels will restrain prices. in addition, the growing trend in the rate of decline in wages may also work as a factor to push prices downward, mainly in services prices which are apt to be influenced by this aspect. 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 possibility that weak demand will further intensify downward pressure on prices continuously warrants careful monitoring. as for the financial market, in the short - term money markets, the end - of - march outstanding balance of the current accounts at the bank of japan was 27. 6 trillion yen as the bank provided further ample liquidity to the money market toward the fiscal year - end in reaction to the increase in liquid