a separate monetary easing policy tool and are supplementing the interest rate policy and forward guidance. in contrast, the bank applies forward guidance to qqe as a package. once the pace of the annual increase in the monetary base is set, the approximate pace of increase in jgb purchases is determined accordingly. in this sense, the pace of increase in the monetary base and that in asset purchases are treated as “ non - separable, ” as shown in chart 3. then the bank uses forward guidance to inform the public of its intention to maintain an increase in the monetary base and thus in asset purchases in the future. in other words, the bank attempts to exert downward pressure on the entire yield curve by influencing the expectations of the markets and the public about the low level of the yield curve in the future. second, the bank purchases treasury discount bills ( t - bills ) and other assets, in addition to jgbs, to meet the monetary base target. 6 moreover, it regularly conducts fixed - rate fundssupplying operations ( with a duration of mainly three months, but available up to one year ). therefore, these short - term operations exert downward pressure directly on short - term interest rates. in contrast, the federal reserve purchases longer - term treasury securities ( with a remaining maturity from four to 30 years ) and agency mortgage - backed securities ( mbss ). the downward pressure on short - term interest rates is exerted through the forward guidance. third, the bank and the federal reserve have different views on long - term inflation expectations. forward guidance issued by the federal reserve assumes that longer - term inflation expectations have been anchored at around 2 percent. however, there may be some limited concerns on the dis - anchoring of inflation expectations. therefore, one of the main tasks for the federal reserve is to continue with monetary easing measures to seek economic improvement, while ensuring that the anchored inflation expectations are maintained. in contrast, the bank has not yet successfully anchored long - term inflation expectations at around 2 percent. thus, the bank must help transform the deflation - oriented mindset of all economic entities and then increase inflation expectations to a higher level of 2 percent. therefore, the threshold used for forward guidance concentrates solely on “ 2 percent ” or “ maintaining 2 percent in a stable manner. ” fourth, federal reserve forward guidance includes employment - related thresholds. it has a dual mandate of promoting price stability and maximum employment, so the reason for this is clear.

acceleration of transactions in japanese financial markets. iv. toward more stable and accessible market infrastructure a. strengthening market infrastructure the experience of the recent crisis has reconfirmed that it is important to secure a stable source of liquidity in financial markets at all times. in strengthening market infrastructure, we should work toward reinforcing the financial market stability against stress, while at the same time considering measures to enhance accessibility with the aim of promoting active transactions. in japan, in order to address issues based on the experiences after the failure of lehman brothers, trading systems and market practices have been steadily established, in consideration of both market stability and accessibility. i hope that such initiatives and discussions will proceed further and japanese financial markets will become stable markets that are credible to market participants and accessible markets that meet the needs of various investors and in funding. b. role of the central bank in closing my remarks, i would like to talk about the role of the bank of japan in strengthening market infrastructure. the effects of the central bank ’ s monetary policy spread to the overall financial market and the real economy through various transactions by market participants and arbitrage trading between markets. the money market is where a central bank conducts daily money market operations that are essential to implement its monetary policy. the bank plays a role in providing market infrastructure by operating the bank of japan financial network system ( boj - net ), which is a settlement system for funds and japanese government securities ( jgss ), and by providing payment and settlement services. thus, the bank recognizes that it is also crucial to strengthen market infrastructure equipped with a high degree of accessibility while maintaining market stability. the bank will continue to support market initiatives to strengthen infrastructure as much as possible through communication with the market, and will actively contribute to such initiatives by improving settlement infrastructure through, for example, the construction of the new boj - net. thank you very much for your kind attention. chart 1 tension in the interbank market : libor - ois spreads ( 3 - month ) notes : 1. ( 1 ) and ( 2 ) indicate the bnp paribas shock ( on august 9, 2007 ) and the failure of lehman brothers ( on september 15, 2008 ), respectively. 2. data up to september 10, 2010. source : bloomberg. chart 2 tension in the corporate financing market : corporate bond spreads ( aa - rated ) notes : 1. corporate bond yields in japan are obtained from “ reference price ( yields ) table for otc bond transactions ”