bank pointed out that a comprehensive approach would be indispensable to promote the resolution of this problem, centering on a more appropriate evaluation of the economic value of npls, more stringent provisioning, and more vigorous corporate rehabilitation. subsequent efforts by financial institutions have more or less been in line with this recommendation. regarding the past - due and restructured large loan assets of major financial institutions, provisions have been made on a discounted cash flow basis, and the extent of provisions as a whole was also raised. disposal of npls by way of write - offs and sales has accelerated considerably, and the outstanding balance has been substantially reduced. furthermore, we have seen new initiatives aiming at corporate rehabilitation, including the establishment of the industrial revitalization corporation of japan. recently, many financial institutions, including regional institutions, have established special sections devoted to industrial rehabilitation. in addition to the npl problem, stock price volatility also poses a significant risk to the management of financial institutions. it is the view of the bank of japan that the unwinding of cross - shareholdings is an inevitable trend, and, as far as the shares held by banks are concerned, it is quite appropriate to insulate the risk due to stock price volatility by expediting the sale of these shares. since the latter part of last year when stock prices began to fall, the bank of japan began purchasing stocks. by partly utilizing our stock purchasing scheme, banks have been reducing their shareholdings, and a couple of major banks have already reduced their shareholdings to below an amount equivalent to tier 1 capital as stipulated by regulation. needless to say, in view of the remaining problems, financial institutions need to continue making best efforts to overcome them. at the same time, in addition to such backward - looking tasks, they must strengthen their earnings power by reconstructing lending and other types of businesses. like firms must create value - added, financial institutions must provide high - value - added financial services, which is the ultimate key determining their future. it cannot be denied that the financial authorities tend to take the initiative in securing financial system stability in view of the magnitude of the problem as well as inherent time constraint. while the severity of the problem might have justified such a course of action in the past, it should be the private sector, with its creative power, which deals with such problems as the disposal of npls, raising capital, and corporate rehabilitation. the bank has consistently been sending

with exports boosted by a weak euro. going forward, germany is expected to enjoy steady growth led mainly by buoyant exports. however, due to the effects of fiscal austerity, economic growth in some peripheral countries is likely to remain sluggish as both the public and private sectors are mired in excessive debt. b. continued high growth in emerging economies next, i will talk about emerging economies. on the whole, business fixed investment has been increasing reflecting higher capacity utilization rates, and private consumption has been boosted by the improvement in the employment and income situation resulting from increased production. since emerging economies do not face the kind of structural problems weighing down on advanced economies such as balance - sheet adjustments and bis central bankers ’ speeches deteriorating fiscal conditions, the virtuous circle of growth in production, income, and spending operates normally and emerging economies are expected to continue to show relatively high growth. china, which takes center stage among emerging economies, continues to enjoy high yearon - year growth in excess of 9 percent. growth in exports temporarily slowed in the middle of 2010 due to the completion of global inventory restocking following the recovery from the global financial crisis. at present, however, exports have regained their upward momentum. as for the outlook, the chinese economy is expected to continue to grow at a rapid pace, with infrastructure - related investment remaining on an increasing trend, and private consumption continuing to expand due to increases in household incomes. ii. japan ’ s economy next, i will outline the current situation of and outlook for japan ’ s economy and prices. a. economy emerging from a temporary pause since the early autumn of 2010, there has been a temporary pause in japan ’ s economic recovery, partly due to the slowdown in overseas economies and the decline in the demand for some types of consumer goods following the previous sharp increase. as a result of the recovery in overseas economies, however, the economy seems to have been emerging from its temporary pause. exports have resumed their upward trend amid the reacceleration of growth in overseas economies and the progress in inventory adjustments in it - related goods i just mentioned. specifically, real exports declined in january from the previous month, partly reflecting the large increase in december – the first in five months – but are showing signs of resuming their uptrend. as for private consumption, while demand for some goods has fallen back following the sharp, last - minute increase in demand ahead of the expiration of subsidies for purchases of environmentally friendly cars and of