##a. in either case, if emerging economies experience the formation and the burst of a bubble, the influence will also rebound to advanced economies. several years ago, when japan was implementing its quantitative monetary easing policy, there were criticisms from asian colleagues that such a policy was promoting carry trades. there have been similar arguments, expressed even more vigorously, since the federal reserve recently implemented its large - scale asset purchase program. although it is understandable for advanced and emerging economies to have their different views, what is essential for us is to acknowledge that we are all in the same boat when it comes to the globalized economy. there is as yet no clear - cut answer to these difficult issues, but i believe it is important that each jurisdiction embraces the following approach when implementing monetary policy. first, advanced and emerging economies need to rethink the meaning of domestic stability of both prices and economic activity, before actually implementing monetary policy. every central bank aims at ensuring domestic stability for its jurisdiction at any time. however, in order to attain this objective under circumstances of economic and financial globalization, it is becoming important for central banks to take into account the impact that their own monetary easing or lack of flexibility on foreign exchange rates might have overseas, as well as the feedback effects on their jurisdictions. second, it is also important to implement measures from a prudential policy perspective. in this regard, the hong kong monetary authority ( hkma ) has sounded a warning since last year about the rapid increase in real estate prices, implementing a variety of policy measures, such as the lowering of the loan - to - value ( ltv ) ratio. these macro - prudential measures are particularly essential for hong kong, where a fixed foreign exchange rate regime has been adopted. an issue currently of global importance is how to design macroprudential measures appropriate to the situation of each domestic economy and to the degree of development in financial markets. iv. economic development in japan and other asian economies so far, i have expressed my views on the outlook for the global economy. next, in the little time remaining, i would like to change the topic and talk briefly about economic developments in japan, with particular reference to the economic relationship with other asian economies. the japanese economy is facing a number of difficult challenges, as indicated by the declining trend of gdp growth rate. we, japanese people, often tend to be rather selfreflective, which is also considered a virtue, but i feel that this tendency has been going too

risks. on the other hand, credit demand of private firms continues to lack momentum as the level of corporate expenditures such as business fixed investment remains below firms ’ cash flow. moreover, firms continue to reduce their debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks ’ lending remains sluggish. meanwhile, the growth rate of amount outstanding of corporate bonds issued is recently rising slightly. the amount outstanding of cp issued is well above that of the previous year and marking the highest level to date, reflecting the favorable environment for issuing cp. the growth rate of money stock ( m2 + cds ) in june was higher than that of the previous month due mainly to the inflow from postal savings. funding costs for firms are on a declining trend reflecting developments in market interest rates. in this financial environment, the lending attitudes of financial institutions and corporate financing conditions remain easy as a whole. for the time being, attention should be paid to the effects of the monetary easing measures taken by the bank, while careful monitoring is required for the effects of stock price developments and corporate profit conditions on the behavior of financial institutions and the fund - raising conditions of firms.