##preciation of the yen. recently there has been an upward trend in external demand. in addition, inventory adjustment in some raw materials and semiconductor industries had almost reached completion by the end of 1996. as a result, production has started to grow at an accelerating pace, reflecting fully the increase in final demand. personal consumption continues to grow moderately but steadily, supported by the buoyant sales of passenger cars, and the recovery in business fixed investment is spreading to a wider range of industries and to smaller firms than previously observed, reflecting improvements in corporate sales and profits. it should be borne in mind that increase in demand ahead of the rise in the consumption tax rate scheduled for fiscal 1997 is contributing to the recent improvement in economic indicators, as in housing investment, and these improvements need to be seen in this light. however, despite a gradual decrease in public - sector investment from the latter half of 1996, the virtuous circle - in which increased production leads to a recovery in business fixed investment and personal consumption through improved corporate profits and employment income - is gradually becoming more apparent. this improvement is encouraging. in contrast to these recent improvements in economic indicators, the beginning of the year saw a significant fall in stock prices and this, together with the decline in long - term interest rates in the financial markets, indicates that the confidence of the market participants in the economic outlook is still slow to improve. various causes can be considered for the market ’ s uncertainty as to future developments in the economy. while the renewed concern over the nonperforming - loan problem of financial institutions may be one important factor, the strong awareness of the effects of the anticipated fiscal tightening in the next fiscal year is also significant. from spring to summer this year, a temporary slowdown in economic recovery seems inevitable due to a reaction to the boost in demand that is occurring ahead of the rise in the consumption tax rate. however, given the strengthening of the virtuous circle, it is more likely than before that the recovery trend of the economy will be sustained. in addition, stock prices appear to have stabilized. therefore, in considering whether the economy can overcome the effects of fiscal tightening to sustain the trend of recovery, it is important to examine macroand micro - economic data, including the economic indicators that will be released in the future, signals from financial markets, and firms ’ business plans for the next fiscal year. i will now turn to the environment surrounding domestic prices. the depreciation of the yen has continued since the beginning of

challenge. amid changing global economic and financial conditions after the financial crisis, japan ’ s economy is also faced with a difficult situation from a longer perspective. for japan ’ s economy ’ s long - term growth, it is essential to raise the productivity of the economy as a whole. to contemplate what kind of reform in the industrial structure is required and how that can be supported on the financial system front, would also be a challenge for the bank of japan. by sharing wisdom with you, the bank will make the utmost contribution as a central bank. thank you.