actions of market participants. when i say “ the lessons ”, they are not such dramatic ones. it can be as simple as “ when benign financial and economic conditions continue for a long time, there is a possibility that various excesses will accumulate, resulting in extremely large economic fluctuations. ” of course, it is easy to anticipate that there will be difficulties in utilizing the lessons, or “ common sense ”, in actual policy responses. however, whether such “ common sense ” is shared broadly or not could make a big difference in the economic outcome. recently, the idea of macro - prudence has been discussed as a methodology for crisis prevention. while specific system designing is a future challenge, i believe that the sharing of “ common sense ” between the policy authorities and the market participants could be a starting point for the discussion of establishing a macro - prudence system. by occasionally reminding ourselves of the lessons from the financial crises and sharing the lessons as “ common sense ” with many people, we will ensure the flexibility of policy management and minimize the possibility of a future financial crisis. the bank of japan's measures to facilitate corporate financing in closing, turning to a different issue, i will briefly touch on the specific steps the bank has taken since last year to facilitate corporate financing. in response to the substantial deterioration in corporate financing since the autumn of last year, the bank has been taking a series of steps such as outright purchases of commercial paper and corporate bonds and special funds - supplying operations to facilitate corporate financing. while those measures were extraordinary as a central bank's policy measures, we judged it appropriate as temporary measures in light of the severe economic and financial conditions. as for how to treat those temporary measures, the bank will decide by thoroughly examining the state of corporate financing and financial markets and considering the degree of their improvements. in doing so, a risk that the prolonged usage of temporary measures might impair an autonomous recovery in market functioning and result in a distortion of resource allocation, will also be taken into account. if the bank can share such a risk as “ common sense ” with market participants, the bank can conduct its policies in a timely manner. in addition, the incentives of the market participants and those of the policy authorities could be aligned in the context of achieving stable economic and financial conditions from a longer term perspective. thank you.

hirohide yamaguchi : some remarks on the financial crisis over the past year speech by mr hirohide yamaguchi, deputy governor of the bank of japan, at the 4th annual euromoney japan capital markets congress, tokyo, 18 september 2009. * * * introduction i am honored to be invited to speak today at the fourth annual euromoney japan capital markets congress. the collapse of lehman brothers one year ago triggered unprecedented disruptions in the global financial markets. fortunately, financial conditions have improved recently to a great extent, but they have not yet fully recovered from the crisis. today, by looking back on the financial and economic developments in the past year, i will provide some of my impressions of those developments. i. economic and financial developments after the collapse of lehman brothers the global financial markets changed drastically after the collapse of lehman brothers in september 2008. market participants became increasingly cautious about taking counterparty risk, causing trading volume to decrease sharply and market liquidity to decline significantly. credit spreads widened and the prices of financial products, including securitized products, plunged. consequently, financial institutions experienced business difficulties or failed one after another in many countries, thereby aggravating financial system concern. credit provisions from financial institutions to firms and households declined markedly, leading to a global credit contraction. confidence, which is the most crucial element in the financial system and markets to function smoothly, was virtually lost. meanwhile, economic conditions deteriorated simultaneously and rapidly around the globe. final demand – namely, housing investment, private consumption, and business fixed investment – plunged, leading to large - scale adjustments in inventory and production. this deterioration in economic conditions, together with a spread of anxiety among firms and households, exacerbated the malfunctioning of the financial system, and in turn deteriorated economic conditions further, causing a downward spiral – the emergence of the so - called adverse feedback loop between financial and economic conditions. also in japan, the functioning of commercial paper and corporate bond markets was impaired, and strains in japan ’ s short - term money markets increased as reflected in a rapid expansion of the libor - ois spreads. nevertheless, the stress imposed on financial markets and the financial system in japan after the collapse of lehman brothers was low relative to that in the united states and europe because financial institutions in japan had little exposure to securitized products. however, the slowdown in economic growth was rapid in japan, compared with that in the united states and europe. against a backdrop of a global