in crude oil prices since summer 2014. inflation expectations - - which play a key role in achieving the price stability target of 2 percent - - weakened, reflecting the headwinds for the global economy that i mentioned earlier, after having remained more or less flat amid the significant decline in crude oil prices ( chart 2 ). the introduction of a negative interest rate and its effects it was against these backgrounds that the bank introduced " qqe with a negative interest rate " in january 2016 in order to address these strong headwinds and achieve the price stability target of 2 percent. to reduce real interest rates amid weakening inflation expectations, nominal interest rates needed to be lowered further. the negative interest rate aimed at an additional reduction in the levels of short - and long - term interest rates by pushing down the short end of the yield curve, in combination with purchases of japanese government bonds ( jgbs ). the introduction of a negative interest rate produced significant effects in terms of lowering nominal interest rates. specifically, jgb yields declined considerably across the entire yield curve ( chart 3 ). as a consequence, lending rates as well as issuance rates for cp and corporate bonds also declined clearly. the lending attitude of financial institutions became more positive. there was no doubt that the negative interest rate made financial conditions more accommodative, supporting firms'and households'economic activities in japan against the headwinds for the global economy. at the same time, however, it became necessary to take account of the impact of the negative interest rate on the functioning of financial intermediation in a broad sense as the yield curve had headed toward flattening by more than expected. specifically, banks'basic business model consists of raising short - term funds and investing in long - term assets, and there was little room for declines in interest rates on deposits, which are the main funding tools. this means that the flattening of the yield curve at a low level reduces the spread between deposit and lending rates, thereby squeezing banks'profits. if profits were squeezed for a long period of time, this would affect their financial soundness cumulatively and exert adverse effects on the functioning of financial intermediation. in addition, an excessive decline in the levels of interest rates such as those with long and super - long maturities lowers the rate of return on insurance and pension products and might have a negative impact on economic activity by leading to a deterioration in people's sentiment. b. thinking behind " qqe

the shiw, from 5. 3 in 1993 to 6. 4 in 2004. this is clearly a pattern shared by many other countries. on the other hand, net financial assets show a much more moderate trend. overall, there seems to be little question that over this long period wealth has increased at higher rates, for many countries much higher rates, than household disposable income ”. the work by thomas piketty has shown that these trends began even earlier, in the 1970s, 26 although the global financial crises may have somewhat modified them. in the united states the ratio of real assets to household disposable income fell back to 4. 2 in 2013, although in italy it still stood at 6. 6 in 2014. the increase in wealth may reflect the accumulation of personal savings or changes in asset values. but saving rates do not seem to show marked increases ; if anything, in some countries they have been on a declining trend. so, much of the substantial rise in wealth - to - income ratios was due to asset prices. this raises several questions, that matter from analytical as well as policy perspectives. why have we been observing such a long - term trend in asset prices? what is it that made for such a significant change in the prices of real, and perhaps to a lesser extent, financial assets relative to consumer goods and services? the financialisation of economies, the growing role of stock exchanges, the privatisation of state - owned firms, the expansion of household insurance technical reserves ( due to the crisis of public pension schemes ) can go some way towards explaining the rise in the ratio of financial wealth to gdp. 27 in particular, there may be merit in considering the changes in shelter costs for owneroccupied housing as part of general consumer price changes. in this case, one should conclude that the prices of housing services went up substantially compared to other consumer goods and services. yet, in part housing expenditure is clearly of a capital - good nature. one should also conclude that house owners were able to extract substantial rent from their accumulated real estate. 28 as i observed in the july 2007 conference of the luxembourg wealth study, “ in the first case we have an issue of relevance for monetary stability, in the second for financial stability, especially as house prices have been moving faster in relatively short periods of time and the larger house values have been used as collateral in financial deals ”. conclusions : lessons from the past and challenges for the future these remarks on the bank of italy