in addition, the recently announced comprehensive economic stimulus package incorporated measures to enhance asset securitization and real estate liquidation, and a systematic framework for the disposal of nonperforming loans was consolidated. also, the japanese “ big bang ” financial deregulation is being implemented beginning with the amendment of the law on foreign exchange and foreign trade, which came into effect on april 1, 1998. under these circumstances, it is imperative for financial institutions to dispose expeditiously of their nonperforming loans as well as to reallocate their resources, in order to efficiently provide financial services that meet the needs of firms and households. along with the efforts to review and to improve the indirect financing system, it is necessary to reinforce direct financing through the expansion of risk capital offered in the capital markets, thereby encouraging the optimal allocation of funds in the economy. thus, the infrastructure for corporate accounting, disclosure of information, the system of taxation for financial services, and payment and settlement systems must be reviewed and improved expeditiously. the third task is to make steady progress in the reform of japan ’ s economic structure through measures such as deregulation and revision of the taxation system. the relaxation and abolition of various economic regulations would bring about higher productivity and economic growth rates in the long run by creating demand and promoting effective resource allocation among industries and firms. also, a revision of the taxation system aimed at improving the return on investment and supporting the optimal allocation of capital should have positive effects on the overall economy. restructuring of other economic systems is also required in order to smoothly shift resources. for example, the current employment system should be reviewed to promote mobility in the labor market. in addition, while efforts should be made to achieve greater efficiency in the public for details, see “ annual review of monetary and economic developments in fiscal 1996 ” in the bank of japan ’ s annual review 1997. sector, a nationwide consensus regarding the direction of the social security system reform should be reached as quickly as possible to ease the deep - rooted concerns in the household sector over the future burden of social security costs. the diverse events that the japanese economy experienced in fiscal 1997 demonstrated the importance of influencing expectations of various economic entities and to gain confidence among market participants in managing economic policy. in this regard, policy makers should strive to reduce the uncertainty concerning the outlook for the economy through improved transparency and consistency in their policy, while initiating effective measures in order to support economic activities of private - sector entities.

other hand, the improvement in economic activities has not stimulated corporate demand for external funds, since firms ’ cash flow is increasing in parallel with a recovery in profits. moreover, firms continue to reduce 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 seems to remain sluggish although its year - on - year rate of decline slowed in april for the second consecutive month. issuance of corporate bonds and cp has been steady. money stock ( m2 + cds ) grew faster in april compared with the previous month on a year - on - year basis. in this financial environment, corporate financing conditions are easing, and the lending attitude of financial institutions is perceived by firms as less severe. it continues to warrant careful monitoring how these favorable developments in the corporate financing environment will affect economic activities.