clear and specific pledge aimed at actual cpi data made public each month, and not the prospect of it. i would like to emphasize this point, although i am aware that it has been stated explicitly on several occasions in the past. as i have explained, the bank's commitment to easy monetary policy is unequivocal. however, the role of financial markets in delivering its commitment effect through the entire economy is equally great and not to be discounted. a key factor behind their role, i believe, is the " price discovery function. " in other words, the determination of market prices and interest rates at levels that reflect the degree of relevant risks is the most important premise for the efficient distribution of funds required by firms and households. further refinement of the price discovery function through development of innovative transactional techniques in an environment of enhanced market liquidity should lead to more efficient funds allocation and, hopefully, more active investment by the private sector. in this connection, markets for new securitization products such as asset - backed securities ( abss ) have grown in recent years. i strongly hope that securities firms, the main players in the securities market, and other relevant institutions will continue to utilize their ingenuity in developing new and innovative financial instruments that will further invigorate financial markets. the bank, for its part, has recently started purchasing abss to help support this market. it is unprecedented for a central bank to directly accept the credit risk pertaining to private - sector debt, and this is, therefore, a move that we hope will act as a " catalyst " for the autonomous development of the abs market. next, i would like to turn to japan's financial system, which, though still under serious strain, appears to be gradually improving its soundness. nonperforming loans ( npls ) held by financial institutions as a whole remain the most crucial issue. the economic value of loans is being appropriately evaluated. and based on this evaluation, appropriate provisioning and write - offs are being promoted. currently, efforts are being made to enhance concerted action by both the financial and industrial communities. it is notable that parties concerned are becoming increasingly aware of the necessity to utilize corporate managerial resources in achieving structural reforms, rather than wastefully abandoning them. while the work of the industrial revitalization corporation, a public entity, is getting into full swing, unassisted and voluntary actions on the part of the private sector are also growing more widespread. moreover,

bank of japan ’ s november report of recent economic and financial developments1 bank of japan, 20 november 2002 * the bank ’ s view * * japan ’ s economy has stabilized as a whole, but there is greater uncertainty toward recovery. with regard to final demand, while the decline in business fixed investment has almost come to a halt, private consumption continues to be weak. moreover, housing investment remains sluggish and public investment is declining. while signs of recovery are still not observed in domestic demand, exports are losing their momentum. the completion of the cutbacks in inventory stocks still underpins the increase in industrial production, but the pace of increase has become slower as exports are not rising anymore. as for the employment situation, the overtime hours worked continue to increase and the number of employees, which widely covers various non - regular employees such as temporary workers, appears to have stopped declining. however, as firms are still maintaining their stance on reducing personnel expenses, household income continues to decrease noticeably due to, among other factors, an ongoing decline in wages. thus, the employment and income situation of households overall remains severe. turning to the economic outlook, a widely shared prospect for overseas economies throughout next year is that they will follow a gradual recovery path. however, an increasing number of economic indicators are softening in some countries, particularly in the united states. based on this development, the recovery in overseas economies is likely to be anemic at least for the time being. therefore, exports and industrial production are expected to be more or less unchanged for the immediate future. with respect to domestic demand, public investment is projected to follow a declining trend and private consumption is likely to remain weak for some time due to the severe employment and income situation. business fixed investment is expected to be supported by the improvement in corporate profits to date, but a distinct recovery is unlikely for the time being due to, among other things, greater uncertainty regarding overseas economies. overall, assuming that overseas economies will recover next year even at a moderate pace, the increase in exports and production will resume, making the foundations of japan ’ s economic recovery gradually firmer. however, the economy is unlikely to show clear signs of recovery for some time, since exports and production are expected to be virtually unchanged for the time being while restraining forces such as excessive labor input and debt persist. furthermore, the uncertainty regarding the outlook for the u. s. and other overseas economies, including geopolitical factors and their effects on the economies, is becoming