system in order to preempt possible deterioration in investors ’ confidence. by means of an event study, it has been empirically demonstrated that the cme policy has a positive impact on financial markets. following the monetary easing events, that study see svensson, lars e. o., “ inflation forecast targeting : implementing and monitoring inflation targets, ” nber working paper no. 5797, 1996. bis central bankers ’ speeches determined that the yields on jgbs declined across all maturities. similarly, corporate yields decreased across investment grades, and bond issuances also improved. the prices of j - reits surged. the bank ’ s monetary easing fended off a further appreciation of the yen and supported stock prices. most of the impact on financial markets arose from the announcement of new easing measures, rather than from subsequent actual purchases. this suggests that investors tend to price the expected impact of the bank ’ s subsequent operations or purchases immediately upon an announcement being made. 17 meanwhile, firms ’ demand for external funds remains weak in the presence of improved cash flow and limited domestic and foreign demand. the amount of outstanding bank loans in the private sector has recently showed an increase, though at a very moderate pace ( chart 8 ). during the previous qe period, it was viewed that banks ’ lending activities remained sluggish mainly because of the balance sheet problems of banks and firms. however, even after the soundness of their balance sheets was restored and financial institutions ’ lending attitude became favorable, lending activities remained moderate. this mainly reflects a shortage of credit demand arising from sluggish economic activities and could be partially attributable to the structural issues that i would now like to discuss. iv. structural issues related to the conduct of monetary policy in this final section, i would like to point out some structural changes that have been affecting the environment surrounding the conduct of monetary policy as well as the bank ’ s efforts to cope with the various issues. a. structural issues affecting macroeconomic performance to begin with, demographic changes are one of the most important ongoing structural issues that japan faces. globally, japan is taking the lead in dealing with demographic trends and associated macroeconomic issues. it is well known that japan has faced a decline in its working - age population ( 15 – 64 years ) in absolute terms since the mid - 1990s. the trend of a declining total population began in 2011 ( chart 12 ). as a result, japan has become the most advanced aging society in the world.

states. on the supply side, the constraints may not be as severe as in the united states. while shortages of intermediate inputs have had some impact, labor supply has room to expand thanks to so - called labor hoarding during the pandemic. differences in labor supply stance have also resulted in differences in wage growth between countries. in japan, wages have risen, but the rate of increase has remained moderate. also, the recent surge in commodity prices due to supply factors puts greater downward pressure on the economies of commodityimporting countries through a decline in household real income and corporate profits. in this situation, attention will be focused on how firms pass increasing costs on to prices and how they determine the level of price increases that households are willing to accept. given these differences in the supply and demand effects, the appropriate monetary policy response will also differ between countries. a common challenge for each country is to determine the magnitude and persistence of the inflationary pressure. in doing so, it will be important to capture the relationship between three prices, namely, the price of goods and services, wages, and commodity prices. a surge in geopolitical risk another challenge facing central banks is the surge in geopolitical risk triggered by the russian invasion of ukraine. this has induced a further increase in commodity prices. and it has increased inflation worldwide. in addition, uncertainties over geopolitical risk are extremely high. these uncertainties could put downward pressure on the global economy by shrinking trade and damaging confidence. in addition to the real economy, close attention has to be paid to financial market sentiment, the global financial system, and cybersecurity. furthermore, if views on geopolitical risk were to change permanently, this could have a longer - term impact on the global economy through structural changes in trade and capital flows. recognizing how extremely uncertain and fast moving the current situation is, central banks are required to implement the appropriate policy measures. iii. frontiers in central banking in addition to these challenges, new challenges have emerged in the frontiers that central banks should develop. i would like to point out three areas. structural change in the economy the first frontier is the acceleration of structural changes in the economy amid the prolonged pandemic. the digitalization and automation of society and the economy were in progress even before the pandemic, and having been accelerated by the pandemic, they have expanded and deepened rapidly. along with this, a restructuring of supply chains has been observed. also, since the effects of