which transcends both borders and the passage of time. i would like to explain my perspectives on unconventional monetary policy, building upon the experiences from both the last japanese crisis and the current global crisis. first, the most essential point in dealing with a financial crisis is to maintain the stability of financial markets and the financial system. central banks need to exert maximum effort in this area. after all, in times of crisis, that is what central banking is all about. in this regard, the bank of japan introduced quantitative easing, credit easing, and stock purchases. with respect to japan's quantitative easing, although the stimulative effects on economic activity through monetarist channels seemed to be self - evident in the eyes of quite a number of economists, the financial system perspective was not fully appreciated. however, looking back, the most important benefit of quantitative easing was its contribution to financial market and financial system stability through the provision of abundant liquidity. 1 in the current crisis, major central banks have expanded their balance sheets, but excluding the bank of england, they have not characterized their measures to loosen monetary policy as quantitative easing. this certainly is understandable when we look back on the japanese experience, where the effectiveness of quantitative easing on real economic activities has not been confirmed. second, as i mentioned, in order to stabilize the financial system, the injection of capital into the banking system together with the provision of liquidity is indispensable. this alleviates pressure on the financial intermediation process, but it is not sufficient to resolve the fundamental problem which had lead to the crisis. this raises the third point. the unwinding of various excesses which have built up in the nonbanking private sector is just as critical. we must not forget that the injection of public funds as capital into the banking sector as well as the provision of abundant liquidity through, for as for the effect of quantitative easing, see bank of japan ( 2005 ), shirakawa ( 2004, 2005 ), ugai ( 2007 ). example, quantitative easing do not alleviate the need for the unwinding process in the nonbanking sector. it must be recognized that some time is necessary before excesses are unwound and the economy can return to a sustainable growth path. the length of time necessary will depend on the size of the imbalances which build up during the bubble period, and the severity of the negative feedback effect magnified by the loss of confidence during the crisis

that follows. in any case, it will not be brief. 2 the fourth issue is the fine line between monetary policy and fiscal policy. measures to take on individual credit risk such as corporate debt are extraordinary steps for a central bank since they come close to the area of fiscal policy which deals with resource allocation at the micro level. i believe such measures are only justified when we are facing a situation where, if left untouched, there is a substantial risk that credit market functions will deteriorate and the resulting weakening of the financial conditions can seriously damage the economy. it must also be compatible with the legal framework provided in each country's central banking law. when such measures are introduced, in order to avoid constraining market functioning where market participants become reliant on such extraordinary measures, it would be important to have an appropriate built - in exit mechanism which reduces the incentive to use the facility as market functioning recovers. additionally, since it is in essence close to the realm of fiscal policy, a clear understanding of which authorities are taking on the risks involved is indispensable. this is also important from the perspective of maintaining public confidence in the financial strength of the central bank. if the central bank's financial strength is perceived to be weakened, concerns may arise, subtly through various channels, with regard to its ability to effectively fulfill its monetary policy mandate. fifth is communication with the markets. without public trust in the organization, a central bank cannot effectively conduct monetary policy. words and deeds have to match. there is much uncertainty with regard to the effectiveness of unconventional monetary policy and extraordinary measures may be pushing the boundary of monetary policy. because of these two aspects, thorough communication with markets and the public becomes all the more important. careful explanations while continuously evaluating both the positive and adverse effects of the steps taken become critical. even during times of a crisis, if central banks take time - inconsistent policy measures, this could rather have negative effects on confidence in the central bank, and as a result reduce the effectiveness of monetary policy. at the end of the day, the central bank needs to communicate its aims and strategies in response to the characteristics of the problem the economy faces, and also needs to take policy measures which are consistent with the communication. i would like to emphasize once again that, especially in a crisis situation, the central banks must make clear their commitment to the stability of financial markets and the financial system, and take decisive policy actions to achieve such goals. concluding remarks the five issues i