The following is the unedited transcript released by The Bank of Japan


A Monetary Policy Meeting of the Bank of Japan Policy Board was held in the Head Office of the Bank of Japan in Tokyo on Wednesday, December 19, 2007, from 2:00 p.m. to 4:12 p.m., and on Thursday, December 20, from 9:00 a.m. to 12:47 p.m.

Policy Board Members Present:

Mr. T. Fukui, Chairman, Governor of the Bank of Japan
Mr. T. Muto, Deputy Governor of the Bank of Japan
Mr. K. Iwata, Deputy Governor of the Bank of Japan
Ms. M. Suda
Mr. A. Mizuno
Mr. K. G. Nishimura
Mr. T. Noda
Mr. S. Nakamura
Mr. H. Kamezaki

Government Representatives Present

Mr. M. Suzuki, Deputy Vice Minister for Policy Planning and Coordination, Ministry of Finance
Mr. J. Hamano, Vice Minister for Policy Coordination, Cabinet Office
Reporting Staff
Mr. N. Inaba, Executive Director
Mr. A. Horii, Executive Director (Assistant Governor)
Mr. K. Ido, Executive Director
Mr. M. Amamiya, Director-General, Monetary Affairs Department
Mr. S. Uchida, Associate Director-General, Monetary Affairs Department
Mr. T. Sekine, Senior Economist, Monetary Affairs Department
Mr. H. Nakaso, Director-General, Financial Markets Department
Mr. K. Momma, Director-General, Research and Statistics Department
Mr. E. Maeda, Associate Director-General, Research and Statistics Department
Mr. T. Idesawa, Director-General, International Department

Secretariat of the Monetary Policy Meeting

Mr. K. Osugi, Director-General, Secretariat of the Policy Board
Mr. K. Shigyoh, Director, Deputy Head of Secretarial Services for the Board, Secretariat
of the Policy Board
Mr. K. Nakamura, Senior Economist, Monetary Affairs Department



Recent Developments in Financial Markets

In the money market, Euroyen rates had increased slightly reflecting factors such as demand for funds maturing beyond the year-end. Interest rates on term instruments, such as yields on financing bills (FBs) and treasury bills (TBs), and interest rates on Euroyen futures had fallen

somewhat. Japanese stock prices had followed U.S. stock prices, rising after the previous
meeting and then falling slightly. The Nikkei 225 Stock Average had recently been in the
range of 15,000-16,000 yen.

Long-term interest rates also continued to follow those in the United States and Europe: they declined to the 1.40-1.50 percent range after the previous meeting, and had been in the range of 1.50-1.60 percent since the beginning of December.

The yen appreciated to the range of 107-108 yen against the U.S. dollar toward the end of November. It then depreciated and had recently been traded in the range of 112-114 yen against the dollar.

Overseas Economic and Financial Developments

The U.S. economy continued to be in a moderate adjustment phase, but as financial market conditions had deteriorated recently and the correction in the housing market was intensifying, a slowdown in the economy was becoming somewhat more evident. Housing investment continued to decrease substantially. Business fixed investment remained on a gradual uptrend, although the pace of increase was decelerating. Private consumption continued to be on an increasing trend, albeit with a somewhat clearer slowing of the pace of increase. In this situation, the pace of increase in the number of employees had been decelerating with some fluctuations. As for prices, the year-on-year rate of increase in the consumer price index (CPI) for all items less food and energy, or the core CPI, had remained slightly over 2 percent. Underlying inflation pressures had not subsided yet as labor market conditions had continued to be tight.

In the euro area, both domestic and external demand continued to expand. Business fixed investment and private consumption remained on an upward trend while exports continued to grow steadily. The U.K. economy continued to show relatively high growth, led mainly by domestic demand. However, recently released survey results and some economic indicators in the euro area and the United Kingdom had been relatively weak.

In China, both domestic and external demand continued to expand strongly. India''s economy continued to show high growth, led mainly by domestic demand. The NIEs and ASEAN economies continued to expand at a moderate pace on the whole.