by the " greenspan put, " named after alan greenspan, former chairman of the federal reserve board ( frb ). in other words, even if financial crisis were to occur, former chairman greenspan and the frb would certainly be able to use monetary policy to fix it. if the greenspan put were true, it could be rational for market participants to take risks on the assumption that the tail risk ( the rarely - occurring risk such as financial crisis ) would never emerge. in short, the misplaced faith of market participants in monetary policy generated overconfidence in the market. 3. erosion of confidence and deepening of the crisis i would now like to turn to the collapse of the “ credit bubble ” and the deepening of the financial crisis that resulted. one of the distinguishing features of the current financial crisis is the liquidity crisis caused by the materialization of counterparty risk. on july 10, 2007, s & p and moody's announced that they would be reviewing the ratings of several residential mortgage - backed securities ( rmbs ) backed by subprime housing loan assets. as a consequence, the aaa ratings of asset - backed commercial paper ( abcp ) backed by these instruments were also downgraded. indeed, an unremarkable change in the ratings of risk assets that were not all that important in the context of the market as a whole directly shook the global financial system. in the united states, money market funds ( mmfs ) have been considered to be extremely safe financial assets. one of the primary reasons for this is that mmfs are only allowed to invest in aaa - rated assets. when ratings were downgraded for abcp, mmfs did not reinvest. naturally, funds that originated abcp and used it to raise money found themselves in fund - raising difficulties : funds under the bear stearns umbrella went bankrupt ; bnp paribas moved to freeze its affiliated fund ’ s new applications and redemptions. the structured investment vehicles ( siv ) created by banks to issue abcp were unable to find funding sources, and then these banks were forced to provide liquidity enhancement instead. banks, which frequently lend each other money, suddenly became aware of counterparty risk, the risk that the other party of a transaction might suddenly go belly up. they began to worry that some bank somewhere might suddenly be unable to secure liquidity and fail. indeed, on august 9, a liquidity crisis actually occurred, with liquidity

. and we have made our commitment to maintain the current quantitative easing, that is to maintain zero interest rates, until the core cpi shows a year - on - year rate of increase of zero percent or above on a sustainable basis. quantitative easing has helped to maintain financial market stability and to make the environment surrounding corporate finance more accommodative, thereby underpinning economic activity. concerns about a liquidity shortage in the money market have been almost dispelled, and short - to medium - term interest rates have been low, reflecting the bank's commitment in terms of policy duration. in the area of corporate finance, borrowing rates have been stable at low levels. although the outstanding amount of loans has been declining, the lending attitudes of banks as perceived by firms and the funding situations of firms themselves have been improving. during 1997 and 1998 amid the currency crises in asia and russia, the failures of several large japanese financial institutions triggered a credit crunch. since then, however, firms have not experienced such hardships, thanks to the provision of ample liquidity by the bank and the strengthening of the safety nets. under quantitative easing, the bank has raised the target for the outstanding balance of current accounts three times this year, resulting in a total increase of 10 trillion yen. in april and may, the bank raised the target in response to downside risks, including the negative effect of sars and the decline in stock prices. in october, the bank raised the upper limit of the target. this was intended to give the bank more flexibility in providing liquidity through its money market operations. unlike earlier increases in the target, the objective of the increase in october was not to deal with downside risks, but rather to reinforce the recent momentum for recovery. in my view, two things are important to strengthen the framework of quantitative easing. one is to clarify our commitment to maintain the quantitative easing policy, thereby enhancing the transparency and increasing the effectiveness of monetary policy. the other is to strengthen the transmission mechanism of monetary policy in the area of corporate finance. in october, with a view to enhancing the transparency of monetary policy, we decided to clarify our commitment to maintain the quantitative easing policy. we also decided to improve the way we communicate to the market our thinking on the economic outlook. in terms of our commitment, we specified two conditions for terminating quantitative easing. first, the most recently published year - on - year rate of increase in the core cpi must register zero percent or above, and such a tendency