contributed to foster an environment where it became more difficult for authorities to act promptly when there were signs that the economy was overheating. we all know where this ended up. that is why the g20 mutual assessment process which aims to bring about strong, sustainable and balanced growth and reduce persistent large imbalances, and the g20 discussions on the ims, such as dealing with global capital flows and global liquidity, are interlinked. combined, they are expected to work to enhance the long - term stability of the global economy and financial system. what is important here is that the mutual assessment process will likely be, at least in its initial phase, a process through which countries better understand each others ’ policies and the implications of their domestic policies on other countries. this will become the basis for constructive dialogue aimed at reaching an optimal combination of economic policies across multiple countries. the reform of the ims will also be a long - term project. a caveat here in this global debate is that there will not be any single bis central bankers ’ speeches model or concept applicable to all countries and situations. a thorough analysis, taking into consideration each country ’ s unique situation, both cyclical and structural aspects, will be required. even the imf with its immense amount of expertise and resources has struggled to identify unsustainable imbalances over the years. in 1989, in the article iv discussion for japan, staff noted that inflation in japan was not “ a matter of concern ” and therefore “ no compelling reason ” could be found to tighten monetary policy. in the 2007 article iv staff report for ireland, it explained that “ economic performance remains impressive ” and that “ banks have large exposures to the property market, but stress tests suggest that cushions are adequate to cover a range of shocks. ” the imf staff report for the us in 2007 also presented “ a soft landing ” as the most likely scenario. it also noted that “ financial innovation and stability have underpinned us economic success. ” the limitations of imf surveillance in the run - up to the current global crisis are detailed in the recently published ieo1 report. i am not trying to single out the imf for criticism. nobody was completely successful in recognizing beforehand the emergence of bubbles and the huge negative impact after its collapse. i simply wanted to highlight that when a single approach toward assessing an issue dominates the intellectual climate, it can cloud our judgment in finding emerging risks which could be seen when approached from a different

bank of japan ’ s october report of recent economic and financial developments1 bank of japan, communication, 15 october 1999. * * * the bank ’ s view2 japan ’ s economy has stopped deteriorating, and exports and production are improving at present. however, clear signs of a self - sustained recovery in private demand have not been observed yet. with regard to final demand, business fixed investment has been on a downward trend. recovery in private consumption continues to be weak on the whole, reflecting the persistent severity in employment and income conditions. housing investment, which had been recovering, has recently peaked out. meanwhile, public works have been rising, and net exports ( exports minus imports ) have continued to grow due to an increase in exports. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production is increasing. additionally, corporate profits have started picking up. in this situation, corporate sentiment has continued to improve. such positive developments in corporate profits and sentiment, however, have not necessarily stimulated business activities, because firms strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. as for the outlook, improvements in the overall financial environment partly due to the monetary easing by the bank, along with a series of economic measures taken by the government, are expected to continue underpinning the economy. moreover, the positive impact on domestic production of the recovery of overseas economies, especially of asian economies, is likely to continue for some time. by contrast, leading indicators suggest a high probability of a moderate decrease in housing investment in the near future. the recent developments in public works orders indicate that public investment is likely to stop increasing. in addition, under cautious sales plans, firms are expected to continue corporate restructuring to improve their profitability. although such restructuring is expected to improve productivity, in the short run, it reduces fixed investment and also discourages household expenditure through the resulting deterioration in employment and income conditions. moreover, it seems that the recent appreciation of the yen will have an adverse effect on corporate profits in the near term. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand. overall economic developments require careful monitoring in consideration of the above points. it is also important to promote structural reform in order to assure the economy ’ s sustained growth in the medium term. with regard to prices, import prices have recently fallen slightly due to the appreciation of the yen, despite the rise in international commodity prices such as crude