avoiding the vicious circle? the answer is “ no ” if we consider the mechanism of financial markets and the behavior of market participants. even if the amount or the period is limited, market participants will always think about what is ahead when they act. it is natural for investors who want to purchase ten - year government bonds to think about ten years ahead. therefore, once market participants anticipate a rise in long - term interest rates after the pre - determined underwriting or outright purchase is completed, long - term interest rates will in fact rise immediately, not in the distant future. furthermore, if market participants perceive that a brake has been released in seeing the central bank begin monetizing the fiscal deficit by even a limited amount, there is a risk that the market would become concerned with vicious inflation and loss of fiscal discipline. given that globalization will continue and that investors worldwide are interested in japanese government bonds for portfolio management purposes, we should be very careful about our policy operations, while keeping in mind such a market response. the issue will come to be a matter of confidence in the yen and the bank ’ s conduct of monetary policy, and eventually confidence in the japanese economy itself. confidence would most likely be eroded if the bank succumbed to the request for the underwriting or increase in the outright purchase of government bonds, with or without a limit on the amount or the period. let me turn to the difference between the outright purchase of long - term government bonds currently conducted by the bank and the recent request to underwrite or increase the outright purchase of government bonds. our current long - term government bond purchase operations are a way to smoothly provide the long - term funds necessary for sustainable growth of the economy. they are neither aimed at the smooth issuance of government bonds nor for supporting their prices. the bank makes it a rule to purchase long - term government bonds in the amount roughly consistent with the trend growth rate of banknote issuance over the medium term. by adopting such a rule, the bank tries not to directly affect long - term interest rates. the bank will continue to hold firm to the posture that it will not purchase long - term government bonds for smooth issuance or price maintenance purposes. relating to this discussion, there are suggestions that the bank should effect quantitative easing through the purchase of government bonds. in response to these suggestions, monetary easing has already permeated the market and the bank has sufficient operational tools to effect monetary easing. the bank does not have to resort to an increase in the

and it technologies, which together have had a tremendous impact on the conventional thinking in the financial industry. previously, small financial institutions with strong local ties excelled in loans to individual customers and other retail financial services, while large financial institutions considered such business less profitable relative to its costs. retail transactions, compared with corporate transactions, involve far greater numbers of customers and correspondingly large amounts of data, and require a large number of competent employees at branch offices to provide various financial products and services. the progress in it, however, has made it much easier to process massive amounts of data efficiently. furthermore, financial institutions have now introduced an efficient method of credit screening using statistical models based on probability theory and drawing on accumulated customer data. this is quite unlike the previous practice, in which each and every loan application had to be individually examined. another change appears in the area of sales. banks used to " respond " to the needs of customers when the latter visited bank premises. now, however, banks are " proactive, " drawing on customer data compiled on the basis of age, sex, and other criteria. such data allow them to better grasp customer needs and develop potential business. customer contact through direct mail may result from such analysis. ii. special features of retail financial services in japan as i have described, moves to strengthen retail financial services can be observed throughout the industrial countries, but the united states and europe have taken the lead, far outpacing japan, which has been burdened by the npl problem for an extended time. within the japanese financial industry hereafter, it will be necessary to establish high - quality financial services for individuals and households, taking the special features of retail financial services in japan into account. i will now point out these special features. a. customers'preference for access to financial services through bank premises first, individual customers in japan show a strong preference for access to financial services through bank branch premises, given that the level of administrative work at japanese banks is relatively high among banks worldwide. this implies that the network of bank branches in japan is of extremely high value as a distribution channel for various financial products and services. under these circumstances, in meeting the financial needs of individuals, it would be extremely effective if the providers of various financial services utilized the network of bank branches as their sales channels for the financial products and services in which they specialize. for example, following the lifting of the ban on over - the - counter sales of investment trusts at banks in 1998, banks -