bank of japan ’ s may report of recent economic and financial developments1 bank of japan, communication, 20 may 1999. the bank ’ s view2 japan ’ s economy, at present, has stopped deteriorating, but clear signs of recovery have not been observed yet. with regard to final demand, business fixed investment has been on a downward trend, and recovery in private consumption continues to be weak on the whole. net exports ( exports minus imports ) are leveling off. meanwhile, housing investment has been recovering. public works seem to be increasing rapidly against the background of the large increase in orders in early spring. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production has stopped decreasing. the deterioration in corporate and consumer sentiment seems to have ceased due to this economic situation as well as the improvements in the financial environment, including the subsidence of the public ’ s anxiety about the stability of japan ’ s financial system and the recovery in stock prices. however, corporate profits remain weak, and employment and household income conditions are deteriorating as the unemployment rate has been marking a historical high. conditions in corporate finance continue to improve, but firms ’ concern about the availability of funds in the future has not completely disappeared yet. as for the outlook, with the progress in inventory adjustment gradually paving the way for a recovery in production, the government ’ s economic measures and the monetary easing by the bank will continue to underpin the economy. improvements in the financial environment are also expected to exert positive effects on the economy gradually. with respect to corporate activities, however, firms have started taking steps toward full - scale restructuring, facing the continued decline in profits. although such corporate restructuring is expected to improve productivity, it may, in the short run, reduce fixed investment and discourage household expenditure through the resulting deterioration in employment and income conditions. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand. overall economic developments require careful monitoring in consideration of the above points. it is also important to promote structural reform, while preparing an environment that facilitates such reform, in order to assure the economy ’ s sustained growth in the medium term. with regard to prices, reflecting the large output gap, domestic wholesale prices are on a downtrend, and corporate service prices are weakening. import prices are rising due to the bottoming out of international commodity prices such as crude oil prices. consumer prices remain weak. in relation to price developments in the future, distinct narrowing in the output

isabel schnabel : sonntagszeitung interview in frankfurter allgemeine interview with ms isabel schnabel, member of the executive board of the european central bank, in frankfurter allgemeine sonntagszeitung, conducted by mr patrick bernau and mr dennis kremer and published on 21 march 2020. * * * ms schnabel, never before has the ecb provided so much money for asset purchases in such a short period of time. is this crisis worse than anything we ’ ve seen before? it ’ s an extraordinary crisis. it ’ s not just europe that is affected, it ’ s the whole world. and in addition to the health problems and the human suffering, we ’ re also experiencing a severe economic shock that is being compounded by the protective measures taken. our new asset purchase programme, which has been put in place specifically for this pandemic emergency, aims to address the particular nature of the situation we are facing. where do you see the biggest problems? the crisis is affecting supply and demand at the same time. initially, the focus was mainly on disrupted supply chains. now the protective measures taken are also hampering production in many companies. and demand is falling too – if people don ’ t know what the future will bring, they hold on to their money, especially since many activities have been curtailed. companies are investing less. and all that means that we are already facing a massive shock ; we need to make sure that it doesn ’ t get even worse. if the ecb buys sovereign bonds, governments will be able to borrow money more easily and pass it on to firms. is that still in line with your mandate? our actions are always determined by our mandate of price stability. and for this we need a functioning transmission mechanism so that monetary policy is passed on to the real economy. that mechanism had recently become impaired, as manifested by the sudden rise in euro area government bond yields. it was affecting all euro area countries, even germany. when that happens, monetary policy has to step in. so it ’ s not a rescue plan for italy? no, of course not. and italy has not lost its market access. the concern was rather that we could start to see self - reinforcing price spirals … … meaning that investors start selling, government bonds fall in value, and so even more investors have to sell … … which can always happen in times of crisis, especially