policy review committee to ensure a continuous monitoring of the economic situation. we are also proposing that the mpc meet at quarterly intervals. the dates on which the meetings will be held will be communicated to the public well in advance. however, there is provision for the mpc to meet in between should the need arise. the mpc will decide on the key repo rate by voting. all these are tentative at this stage and are subject to revision or confirmation by the mpc when it meets later today. inflationary pressures have built up lately in our economy and the inflation rate is expected to cross the single digit level by june this year. we are experiencing the highest rate of inflation in a decade. it is a cause for concern, but certainly not for alarm as the rate is expected to decline as the pass - through effects of recent price hikes taper off. this of course assumes that we do not compound the problem by inappropriate fiscal and wage policies. eternal vigilance on these fronts is the price we have to pay to combat inflation. in any case, we must remind ourselves that the primary objective of the bank is to maintain price stability and to promote orderly and balanced economic development. thus, in our mandate as given by the act setting us up, price stability is not an end in itself. rather it is a means to an end, which is sustainable macroeconomic growth. we therefore need to weigh real sector issues adequately in our monetary policy decisions. in this respect, the bank intends to institute regular contact with stakeholders of the real sector in addition to those of the financial sector we normally deal with. and i very much welcome the presence among us this morning of employers, trade unions, economic operators, exporters, and their respective associations and chambers. i am convinced that there is a lot more that must be done – and done fast - within the bank. we are expecting shortly the arrival of a consultant from another central bank to help us with a strategic review of our existing structure. as a pro - active institution, we want to make sure that our staff is equipped with the right tools, given state - of - the - art training and imbued with the level of professionalism that the situation calls for. i hope i shall be able to count on the support of the staff and the union as we press on with the re - engineering that we have already embarked upon. we shall proceed in a measured manner, with full consultation every step of the way. i have been

and product development capacity as well as construction investment demand related to the beijing olympic games and the shanghai exposition. the third is the complementary nature of the relationship between japan and the rest of east asia. east asia is endowed with an abundant labor force that is diligent and relatively inexpensive. it is thus quite an effective strategy for japanese companies shouldering high labor costs to make use of such a labor force to strengthen their competitiveness. accordingly, many japanese manufacturing firms have moved their production and processing bases to east asia which has been welcomed by the host countries as these moves create employment and increase income. furthermore, they look forward to the transfer from japan of production and product development techniques as well as managerial expertise that will help them move to a more sophisticated industrial structure. it is clear that all these reasons lead naturally to the formation of interdependent relationships between japan and the rest of east asia. in fact, i see it as an encouraging trend that momentum is growing among japanese companies to seize a variety of new and challenging business opportunities in east asia, in china in particular. having said this, there is concern in japan that the expansion of japanese companies to east asia engenders a hollowing - out of japanese industry, which adversely affects domestic production and employment. there exists a deeply embedded view that rapid growth in east asia, especially in china, may constitute a threat to the japanese economy. however, faced with intensifying global competition, due partly to the increased consolidation of east asia in the global economy, japanese companies must strive to increase their ability to create high value - added goods and services, while raising productivity and correcting their high cost structure. not only companies expanding their overseas operations, but also those remaining in japan, need to enhance their competitiveness through innovation and the reallocation of resources. in addition to people, such intangible assets as information, knowledge, and expertise move freely across borders. by effectively utilizing these assets and human resources, japanese companies should be able to generate a self - sustained virtuous cycle of creating high value - added goods and services in japan. as economic globalization progresses, deeper interdependence between japan and the rest of east asia is of great significance. one of the driving forces behind this interdependence is the prevalence of free trade agreements ( ftas ) in east asia. ftas expand trade and direct investment by eliminating trade barriers among the parties to such agreements. although recognizing such merits, we should bear in