Although weakening of prices had come to a halt by the second half of fiscal 1996, prices were unlikely to follow an upward trend. Against the background of these economic and price conditions, the Bank of Japan maintained an easy monetary policy, keeping the official discount rate at its September 1995 level of 0.5 percent to establish a solid foundation for the economic recovery.
As for financial developments, the overnight call rate (uncollateralized) remained on average slightly below the official discount rate following monetary adjustments by the Bank of Japan. Long-term interest rates continued to rise with some fluctuations in the first half of 1996, but fell sharply in the second half.