of areas : biotechnology and other advanced technologies, new industrial clusters linked to recycling and other environment - related technologies, as well as regional city revival, sightseeing, medical care, and nursing services. to strengthen such trends, regional financial institutions are expected to play a new role in their regions. in this regard, the thinking behind their business decision - making in the past needs to be radically overhauled. for example, decisions about whether or not to assume particular risks should be based on a close examination of the nature of projects at hand rather than depending unduly on traditional collateral or guarantee - based methods. they should also raise their levels of expertise at providing advisory services relating to the smooth management of projects. this in turn will lead to the revitalization of regional financial institutions themselves. once the blanket protection of demand deposits is removed, financial institutions will no longer be able to count on support from the authorities. in principle, they will have to rely entirely on their own intellectual resources and creativity in dealing with the tasks facing them, including the nonperforming loan problem. it is conceivable, however, that there may be financial institutions, which are keen to rebuild their financial base, but which may not be able to strengthen their capital positions within the limited time frame without outside assistance. to deal with this possibility, injections of public funds which may be executed without reference to systemic risk should be considered apart from the measure stipulated in article 102 of the deposit insurance law. i am aware of a variety of learned opinions calling for caution in establishing another system of capital injections. bearing these opinions in mind, i hope that we will somehow manage to find a way to design an appropriate new framework - one that will function as the last public support to the efforts of the private sector. in closing, let me reiterate our determination to support the efforts of the private sector and to exert ourselves to the full to achieve sustainable growth.

recovered to a level closer to what can be considered normal. another problem related to severe balance - sheet adjustments is the breakdown of the market economy ’ s natural selection mechanism. the role of financial institutions to channel funds to productive enterprises can be obstructed when those institutions have significant amounts of impaired assets. suffering from severe balance - sheet problems, institutions may find themselves with no other choice but to keep borrowers on life support, which prevents them from extending new loans to more promising businesses. such patterns were observed in japan during the financial crisis of the late 1990s. the market selection mechanism broke down, and the survival of the fittest no longer applied to the world of business. so - called zombie firms were supported by zombie banks. strong evidence of this phenomenon is found in a study i conducted with nakajima and kiyota, the main conclusion of which i have included in the next slide. by conducting a large - scale panel analysis at the firm level, this research was able to show that during the period of the financial crisis of 1997, the total factor productivity of surviving firms was actually lower than that of exiting firms. 6 2. 3. impact of information and communication technology the third force that is shaping the global economy is the impact of information and communication technology ( ict ). i argue that ict has in fact been a polarizing force both in the labor and product markets. furthermore, the effects are not confined to specific industries, but are more or less ubiquitous and far reaching. labor markets the reason ict impacts the labor market is that it can be applied to a variety of moderately skilled tasks, and consequently displaces workers from those tasks. for example, banks used to be inundated with paper. payments were made in checks, slips of paper were made to record transactions, which were in turn tracked on paper ledgers, and ticker tapes provided up to the minute market information. banks employed hundreds or even thousands of clerks to literally push the paper around their offices, just to keep track of their operations. clerks were skilled in the sense that they had to know what was the important information on those pieces of paper, and in which books such information was to be written down. ict changed all this. now, virtually all bank transactions are processed electronically with minimal intervention from human workers. as a result, the bank clerk has become extinct, or at least an endangered species. such changes occurred not only in banking but in all industries. any task that could be programmed