; however, that should not stop all countries and firms from continuing their best efforts. it is never too late to start the remediation process, focused in the first instance on the most critical systems, and working diligently to seek the highest level of preparation possible. the risks of some disruption to international trade and financial markets are certainly not negligible, but these risks can best be handled by continued hard work and by planning for current and likely contingencies. plan of action as we move forward, i would like to suggest some steps we can all take. first, you and your colleagues are critical in continuing to build awareness within your financial and business communities and within your countries, about the importance of focusing on the year 2000 so this event does not become the next crisis impacting financial markets. second, some governments do not yet fully appreciate the magnitude of the year 2000 problem. the joint year 2000 council has an active program to raise awareness among financial regulators worldwide and to share information on important year 2000 tasks. you can assist these efforts by raising the topic with political and regulatory leaders in countries in which your firms are active and providing your market - based sense of the risks. third, i believe that accurate and timely information is the best antidote to the misinformation that is likely to spread as we get closer to the critical dates. i would, therefore, strongly encourage the efforts like those currently under way by global 2000 to obtain voluntary disclosure of information about the status and readiness of firms. i expect that market participants and the public at large will start to expect more information, and those that do not disclose face the risk of being considered unprepared for the year 2000 transitions, raising business viability and even systemic concerns. fourth, the “ dependencies ” in the public infrastructure that we all have, namely telecommunications, power, and water, need further attention. this is a vital link that is becoming increasingly obvious. i would encourage you to have conversations with your utilities and telecommunications providers, and with appropriate regulatory authorities, about preparedness of the industries that are vital in operating the public infrastructure. utilities have been particularly cautious in explaining their preparedness. more disclosure from them would be useful. finally, an important and responsible part of any project includes contingency planning. contingency planning should be recognized as a legitimate exercise, not an admission that you expect failure in the core effort of preparing for year 2000. conclusion in closing, let me say that we have achieved

##emic growth and repeated bouts of very low inflation and deflation. japan's experience re - emphasizes the importance of regulatory policies that may prevent feedback loops between asset price bubbles and credit provision. indeed, during the boom, japanese regulations that allowed banks to count as capital unrealized gains from equities may have contributed to banks'appetite for equities during the stock market run - up and to financial instability as the stock market collapsed. after the bursting of the bubble, policymakers did not quickly resolve the fragility of the banking sector, thereby allowing conditions to worsen as banks kept lending to inefficient, debt - ridden, so - called zombie firms. on the other hand, japan's experience does not support the need for preemptive monetary policy actions to deflate a bubble, as some commentators have suggested. 23 the tightening of monetary policy during the bubble period does not appear to have led to better economic outcomes. moreover, the boj did not reverse course sufficiently or rapidly enough in the aftermath of the crisis. 24 research suggests that it was the slow response of monetary policy to the deterioration in the economic outlook and fall in inflation following the bursting of the bubble that contributed to the onset of deflation. 25 the recent u. s. experience as highlighted in my introduction, the issues i have discussed today are especially salient because of the recent experience with house prices in the united states. it is too early to draw firm conclusions regarding all of the factors that have contributed to the rise and decline of house prices and the impact of these developments on our financial system and the macroeconomy. but the federal reserve and other government agencies have already begun to address some weaknesses that emerged during this period. for example, problems arose in recent years in the chain linking the origination of mortgages to their distribution to investors through structured investment products like mortgage - backed securities. underwriting standards became increasingly compromised at origination. in retrospect, the breakdown in underwriting can be linked to the incentives that the originate - to - distribute model, as implemented in this case, created for the originators. notably, the incentive structures often tied originator revenue to loan volume rather than to the quality of the loans being passed up the chain. this problem was exacerbated by the bubble in house prices : lenders began to ease standards as further appreciation in house prices was expected to ensure that risk was low, and investors failed to perform the research necessary