With regard to Japan's economy, the increased sluggishness in economic activity is likely to persist for the next several quarters and, going forward, attention needs to be paid to the downside risks to economic activity arising from developments in the financial crises in the United States and Europe and their influence as well as financial conditions in Japan.
Turning to prices, upside risks have decreased compared with the past, and there is a possibility that the inflation rate will decline further if downside risks to economic activity materialize or commodity prices fall further. Based on these assessments, the Bank, at the Monetary Policy Meeting held on October 31, reduced the policy interest rate by 20 basis points to 0.3 percent.