faced with such developments, it would be prudent to strengthen further the resilience of the global financial system. [ slide 3 ] i would argue that macroprudential policy has a key role to play to address the immediate concerns and is one critical element in strengthening resilience further. macroprudential authorities can seek to prevent an acceleration of the financial cycle. or, with more reasonable ambitions, to contribute to limit the formation of “ lumps of risks ”. the most ordinary macroprudential intervention relies on communication. by reminding time and again of the possible pitfalls of leveraging up and becoming complacent about risk taking, we seek to prompt second thoughts and ensure that risks are effectively understood, adequately priced and sensibly managed. if it starts with communication, macroprudential policy in this respect can also go further. indeed, this preventive reasoning led the hcsf, the french macroprudential board, to limit the main french banks ’ exposure to large “ highly indebted firms ” : by making it more difficulty to an already heavily indebted corporate to take on even more debt, the aim is to restrain the development of a segment of overstretched large firms. but the main objective of macroprudential authorities and an easier one to achieve should be to strengthen the resiliency of the financial sector when things are going well to allow it to withstand the shocks that will eventually hit. this is the rationale behind the ccyb. we do not intend to curb the overall credit growth. rather, as jfk once said, “ the time to repair the roof is when the sun is shining ”. by setting the ccyb rate above zero now, we lock in existing excess capital at a time it is relatively cheap ( in good times, retain earnings is the main driver of capital increase and the impact of a higher capital requirement on credit and the economy at large is limited is the current circumstances ) to be able to absorb futures losses and loosen the regulatory requirement at a time capital is scarcer and the macroeconomic impact of a gap would be significant. 3 / 4 bis central bankers'speeches a number of european countries have taken similar steps to increase their room for manoeuver ahead of a possible future storm. in that context, macroprudential policy is often described as a complement to monetary policy : a policy necessary to remedy the financial stability consequences of very accommodative monetary policy.

avoiding the vicious circle? the answer is “ no ” if we consider the mechanism of financial markets and the behavior of market participants. even if the amount or the period is limited, market participants will always think about what is ahead when they act. it is natural for investors who want to purchase ten - year government bonds to think about ten years ahead. therefore, once market participants anticipate a rise in long - term interest rates after the pre - determined underwriting or outright purchase is completed, long - term interest rates will in fact rise immediately, not in the distant future. furthermore, if market participants perceive that a brake has been released in seeing the central bank begin monetizing the fiscal deficit by even a limited amount, there is a risk that the market would become concerned with vicious inflation and loss of fiscal discipline. given that globalization will continue and that investors worldwide are interested in japanese government bonds for portfolio management purposes, we should be very careful about our policy operations, while keeping in mind such a market response. the issue will come to be a matter of confidence in the yen and the bank ’ s conduct of monetary policy, and eventually confidence in the japanese economy itself. confidence would most likely be eroded if the bank succumbed to the request for the underwriting or increase in the outright purchase of government bonds, with or without a limit on the amount or the period. let me turn to the difference between the outright purchase of long - term government bonds currently conducted by the bank and the recent request to underwrite or increase the outright purchase of government bonds. our current long - term government bond purchase operations are a way to smoothly provide the long - term funds necessary for sustainable growth of the economy. they are neither aimed at the smooth issuance of government bonds nor for supporting their prices. the bank makes it a rule to purchase long - term government bonds in the amount roughly consistent with the trend growth rate of banknote issuance over the medium term. by adopting such a rule, the bank tries not to directly affect long - term interest rates. the bank will continue to hold firm to the posture that it will not purchase long - term government bonds for smooth issuance or price maintenance purposes. relating to this discussion, there are suggestions that the bank should effect quantitative easing through the purchase of government bonds. in response to these suggestions, monetary easing has already permeated the market and the bank has sufficient operational tools to effect monetary easing. the bank does not have to resort to an increase in the