contraction of financial market activity following the lehman shock in september 2008. at the same time, the bank is putting forward additional measures to dispel “ chronic illness, ” namely deflation. next, i will elaborate on the bank ’ s monetary policy measures implemented since the lehman shock. a. measures to address the acute symptoms, or the rapid financial contraction immediately after the failure of lehman brothers, financial market participants throughout the world became overly cautious about their counterparts ’ creditworthiness, and there were cases where even financially sound institutions found it difficult to acquire funds. during such a rapid financial contraction, which we have described as acute symptoms, a central bank is the sole provider of liquidity. thus, from the day after the failure of lehman brothers, the bank successively injected abundant liquidity into the money market by conducting sameday funds - supplying operations. subsequently, it implemented measures to provide ample liquidity to financial markets, such as increasing the amount of outright purchases of japanese government bonds and introducing u. s. dollar funds - supplying operations against pooled collateral. in japan, it was the cp market that faced a particularly serious shortage of liquidity as market participants withdrew their funds from the market, fearing the risk of corporate failures. firms that could no longer acquire funds through cp issuance flocked to banks for financing. as banks tried to respond to the increased demand for loans, they found themselves unable to afford to supply sufficient funds for small firms or firms with low credit ratings, or for repo transactions. in this way, the liquidity shortage spread to various markets. to address this situation, the bank, in addition to increasing the frequency and size of cp repo operations, introduced outright purchases of cp as a temporary measure. this was a highly exceptional step, in that a central bank took on the credit risks of individual private firms. the underlying objective was to facilitate corporate financing and resolve the liquidity shortage in the cp market by helping to restore confidence in cp underwriting among market participants. in addition, the bank introduced a series of temporary emergency measures to facilitate corporate financing, including : ( 1 ) the easing of the rating requirement for corporate debt to be accepted as eligible collateral ; ( 2 ) the special funds - supplying operation to facilitate corporate financing ( hereafter the special operation ), through which the bank provided longer - term funds for an unlimited amount against the value of corporate debt pledged as collateral at a very low fixed interest rate ; and ( 3 ) outright purchases of corporate bonds with

as significant fruits, in that central banks turned a knowledge of economics that also took account of the experience of japan after the bursting of a bubble into actual policies to overcome their challenges. in such a manner, economic theory and actual economic policy are closely or even inseparably related, in that they are used to tackle challenges together, and are progressing given that new challenges will emerge one after another. triggered by this global financial crisis, it is expected that economics will continue to evolve. at the same time, for a practitioner who is involved in public policy, there seems to be an implication that policy should be pursued by utilizing knowledge of economics while understanding its limits. in actual economic policy management, it is not rare to choose a policy that can be regarded as second best or third best. even a policy that can be considered optimal or first best – namely, the most efficient one from the standpoint of economic theory – might not be suitable. that is, not suitable in terms of such social values as fairness and conventional wisdom, or it might be difficult to reach an agreement within the democratic political process. in addition, there were many cases in which a policy was considered desirable in theory but could not be adopted because of practical difficulty. some policy needs to go through procedures such as budgeting and legislating when it is to put into practice. let me take an injection of public funds to deal with a nonperforming asset problem as an example. at the time of the lehman crisis in 2008, the importance of injecting public funds as soon as possible to dispose of nonperforming assets was widely understood. by contrast, in japan in the 1990s, it was quite difficult to gain support for such an assertion within the democratic process. in japan, it was in 1999 when a full - fledged injection of public funds was made to major banks : several years have already passed since the problem in the financial system surfaced. thus, it is difficult to use taxpayers ’ money before actual pains materialize, and this phenomenon can happen in any country, albeit with differing degrees. taking these points into account, in order to actually pursue policy, it is necessary not only to study economics but also political economy and public policy theory. specifically, it becomes necessary to have staffers who understand the aforementioned difficulties in actual pursuit of public policy, and who on that basis plan policies and put them into practice. i believe that a variety of staffers with different backgrounds, who not only studied economics or jurisprudence