policy change, the term spread increased. chart 3 short - term and long - term interest rates 2. 5 % 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 cy 00 01 02 03 04 monetary easing uncollateralized overnight call rates 11 12 13 14 15 monetary tightening yields on 10 - year jgbs source : bloomberg. on the other hand, when monetary policy was eased, the yield curve sometimes flattened and sometimes steepened ; specifically, when the main operating target for money market operations was changed on march 19, 2001 from an uncollateralized overnight call rate of around 0. 15 percent to the outstanding balance of the current accounts at the bank at around 5 trillion yen ; when the outstanding balance of the current accounts at the bank was raised on december 19, 2001 from above 6 trillion yen to around 10 - 15 trillion yen ; when the upper limit of the target balance of the bank's current accounts was raised on october 10, 2003 so that the target balance would change from around 27 - 30 trillion yen to around 27 - 32 trillion yen ; when the bank's target for the uncollateralized overnight call rate was lowered on october 31, 2008 from around 0. 5 percent to around 0. 3 percent ; and when the bank's target for the uncollateralized overnight call rate was lowered on october 5, 2010 from around 0. 1 percent to around 0 - 0. 1 percent. in particular, when qqe was introduced on april 4, 2013 - - when the bank's main operating target for money market operations changed from the uncollateralized overnight call rate of around 0 - 0. 1percent to the monetary base so that the monetary base would increase at an annual pace of about 60 - 70 trillion yen - - the yield curve steepened as a result of monetary easing. the reason probably is that monetary easing was recognized as having a positive effect on inflation expectations and economic activity. thus, whether the yield curve flattens or steepens when short - term interest rates are raised depends on the economic situation as well as the market's view of monetary policy at the time. it is therefore wrong to think that if short - term interest rates are raised, the yield curve will steepen. i think that what market participants would like from dialogue with the central bank is for the central bank to provide a clear outlook for the future course of monetary policy. however,

to support each other ; and ( 4 ) the labor shortages in the face - to - face services industry and among small and medium - sized firms. to share my perspective regarding the conduct of monetary policy for the immediate future, i see japan's economy currently being in a rare situation, in which pent - up demand is underpinning economic activity even as the rise in consumer prices has been triggered by the rise in import prices. given this situation, i believe that we are at a stage now where it is necessary to carefully monitor whether a virtuous cycle between wages and prices will be achieved in japan. for the moment, therefore, i consider it appropriate for the bank to continue with monetary easing. b. side effects of large - scale monetary easing the bank has carried out large - scale monetary easing while striking a balance between its positive effects and side effects. next, i would like to turn to some of the side effects. the first is the deterioration in market functioning. at its monetary policy meeting ( mpm ) held last december, the bank modified its conduct of yield curve control in light of this side effect. let me explain the nature and background of the modification ( chart 15 ). since early spring 2022, the jgb yield curve had been under significant upward pressure, in a situation where overseas central banks raised policy interest rates and consumer prices rose in japan. while the bank had been purchasing a necessary amount of long - term jgbs so that 10 - year jgb yields stayed within the range of plus and minus 0. 25 percentage points from 0 percent, upward pressure on interest rates had frequently caused long - term interest rates to remain at the 0. 25 percent upper limit. in this situation, yields on bonds with 8 - and 9 - year maturities were higher than on 10 - year bonds, and a price gap was observed between futures and spot markets. in addition, while the yields for the most recent issues of 10 - year jgbs had been at 0. 25 percent or lower, issues of 20 - year jgbs with a residual maturity of 10 years were trading at higher yields. amid such distortions in the yield curve, a survey of market participants conducted by the bank found a growing perception that the functioning of the jgb market was deteriorating. jgb yields serve as reference rates and indicators for corporate bond yields, bank lending rates, and other funding rates. if such distortions persist, they could negatively impact financial conditions, such as