climate change and inequality reflecting on the impact of the pandemic and the significant economic transitions that started before it and remain ahead of us ( climate change and demographic change in particular ), it is clear that they require long - term and more integrated thinking across a number of dimensions. 25 we need to be thinking broadly and over longer time horizons to fully capture the trade - offs we face, not least because many of these challenges also require a global policy response. 26 policies to address climate change, for example, may appear costly in a short time horizon, but deliver large net benefits in a longer horizon that makes clear the benefits of avoiding catastrophic increases in global temperatures. central banks are acting in response to the climate challenge. we ’ re embedding climate change considerations into our supervisory assessments. this is about ensuring the true environmental and indeed societal costs of climate change are factored - in appropriately, whether the design of insurance policies or the granting of credit or something else. 27 we're broadening our understanding of the nature and magnitude of financial risks stemming from environmental change and how interlinkages across the economic and financial system might amplify these risks. we're working with our domestic and international partners to ensure that green and sustainable financial products are defined appropriately and identifiable to investors. our goal is to ensure that climate change is a strategic priority for the financial system, and that the financial system is resilient to the risks posed by climate change and capable of supporting the transition to a lower - carbon world. central banks need to play their part and lead by example in their own actions, as well as deliver on their mandate to ensure that the financial system is resilient to climate - related risks and ready to support the transition to a more sustainable world. but let us also be clear : central banks cannot solve the problem of climate change. the challenge requires action on the part of the whole community, businesses, households, as well as policymakers. inequality is another issue for today ’ s panel and both income and wealth inequality have been increasing in many advanced economics since the 1980s. as my colleague on the ecb ’ s governing council, isabel schnabel, has outlined, there are two factors which can explain income inequality trends. these are the effects of technological development in the labour market – with less - skilled workers experiencing lower wage growth than those with higher education levels – and the reduction in bargaining power for workers. 28 inequality is something that central banks need to pay close attention

bank of japan ’ s may report of recent economic and financial developments1 bank of japan communication, 21 / 5 / 98. the bank ’ s view2 japan ’ s economy remains stagnant with continued strong downward pressures on economic activities. with respect to final demand, public - sector investment seems to have bottomed out. however, growth in net exports has virtually peaked out as exports to other asian countries decline. business fixed investment has been on the decline. private consumption shows no sign of recovery although the deterioration has slowed. housing investment remains weak. against the background of weak final demand, inventories have accumulated further and industrial production continues to decline. as a result, not only corporate profits but also employment and income conditions have worsened significantly. the above indicates that production, income, and expenditure show negative interactions with one another. in these circumstances, the economic stimulus package was decided, and the fiscal 1998 supplementary budget bill was submitted to the diet. these measures are expected to boost demand through additional fiscal expenditure and special income tax - reduction and thereby alleviate the downward pressures on the economy. in order for the japanese economy to resume a self - sustained recovery, improvements in corporate and household confidence are vital. hence, the overall economic activity and the effects of the economic stimulus measures should be carefully monitored. with regard to prices, wholesale prices continue to fall, and the year - to - year increase in consumer prices ( excluding the effects of institutional changes such as the rise in the consumption tax rate ) has been declining close to zero. as for the future, the downward pressure on domestic prices, induced by the decline in import prices including overseas commodity prices, is weakening. also, the expansion in the output gap in the economy is expected to slow as the economic stimulus package is implemented. in the immediate future, however, prices are likely to weaken reflecting the present high inventory level and the relatively large output gap. in the financial markets, both long and short - term interest rates followed a declining trend with the releases of weak economic indicators. yields on long - term government bonds have recorded a historical low and stock prices remain soft. the yield differential between bonds issued by the private sector and those by the government, as well as the so - called “ japan premium ”, has remained at the relatively high level and shown no significant decrease, indicating the continuing cautious attitudes of market participants toward credit risk. with respect to monetary aggregates, the growth in m2 + cds, which had picked up from the end of 1997, slowed