underpin the first pillar ’ s commitment. these are well captured in the words “ quantity ” and “ quality, ” and changes have already been seen in the expansion ( i. e., quantity ) and composition ( i. e., quality ) of the bank ’ s balance sheet. in terms of the expansion of the balance sheet, the bank will increase the monetary base massively through purchases of a variety of assets including japanese government bonds ( jgbs ). it aims to almost double the amount outstanding of the monetary base in two years, from 138 trillion yen at end - 2012 to 270 trillion yen at end - 2014. in terms of the composition of the balance sheet, the bank will increase assets with relatively high risks. it now purchases jgbs in all maturities including those with super - long maturities of 40 years. as a result of this, the average remaining maturity of the bank ’ s jgb purchases has been more than doubled, extending from slightly less than three years to about seven years. it is expected that the effects of policy accommodation on financial conditions and the real economy will strengthen through working on interest rates across the whole yield curve. on top of this, the bank has increased the purchases of exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ) in order to suppress risk premiums associated with those types of assets. impact on nominal interest rates and inflation expectations consisting of the two pillars that i have just explained, the qqe permeates the economy through nominal interest rates and the inflation expectations of financial market participants. first of all, the bank ’ s ample provision of liquidity to the private sector through the purchases of jgbs and other assets will lower nominal interest rates. moreover, the qqe, with the commitment to the 2 percent price stability target, will lift market participants ’ inflation expectations. let me come back to this point later. both the downward pressure on nominal rates and upward pressure on inflation expectations will contribute to declines in the expected real interest rates, because the expected real bis central bankers ’ speeches interest rates are derived by subtracting inflation expectations from nominal interest rates. this has an important implication for the economy. nonetheless, the upward pressure on inflation expectations is a double - edged sword : on the one hand, it is a factor contributing to declines in the expected real interest rates ; on the other, it can lift up nominal interest rates. as i will explain shortly, the

swap lines with the us federal reserve to provide dollars to financial institutions in their national markets. second, when credit markets are under severe stress, a central bank is sometimes expected to step in to support market functioning. the modality for central bank intervention differs across individual circumstances. for instance, the federal reserve has pursued credit easing policy to unfreeze the us financial market by purchasing plain as well as assetbacked commercial paper, agency - related securities and so forth. in spite of its bankcentered system, japan has also been affected by the turmoil in global capital markets. in fact, japan ’ s commercial paper and corporate bond markets tightened sharply in the last several months, which caused an acute squeeze in japan ’ s corporate finance. to counter this, the bank of japan has started buying commercial paper and shorter - term corporate bonds, assuming credit risk of private sector debtors. overall, japanese banks are in stable conditions and we do not see a systemic problem in them. however, japanese banks have sizable holdings of corporate shares and part of the unrealized gains on those share - holdings constitutes banks ’ tier ii capital. therefore, falling equity prices reduce their capital buffers and constrain the financial intermediation process. to alleviate this, the bank of japan has restarted the purchase of bank - held corporate shares. in a similar vein, the bank of japan has also announced a plan to supply subordinated loans to the japanese banks subject to international capital standards. this is aimed at bolstering their tier ii capital. i would like to emphasize that these measures are quite exceptional by central banks ’ standards. in a nutshell, the us and japan are working in their own ways to relieve the tensions in the credit markets. third, when the vicious circle between the economic downturn and financial instability is in motion, macroeconomic policies should play an active part in boosting aggregate demand. interest rate reductions are most traditional in the policy tool - kit and both the federal reserve and the bank of japan have cut their policy rates to effectively zero. fiscal stimulus should be considered as well, without putting the long - term fiscal discipline at risk. as highlighted in the recent g20 summit communique, major countries are already undertaking a fiscal expansion that will amount to $ 5 trillion by the end of next year. fourth, a holistic approach is needed to restore financial stability. by “ holistic ”, i mean implementing a range of policy measures in tandem, including capital augmentation for banks