. another purpose of the three - tier system therefore is to ensure that transactions continue to take place in the short - term money market. under the three - tier system, some financial institutions will hold current account balances to which the negative interest rate is applied, while other financial institutions will have unused allowances in tiers to which a zero or positive interest rate is applied. i mentioned earlier that the aggregate amount of policy - rate balances to which the negative interest rate is applied was initially about 10 trillion yen on a net basis for all financial institutions that hold a current account at the bank. in fact, looking at the january 2016 reserve maintenance period, if we sum up the amounts outstanding of policy - rate balances of financial institutions that have a positive policy - rate balance, the sum was about 20 trillion yen. however, given that some financial institutions have unused allowances in tiers to which a zero or positive interest rate is applied, these financial institutions can raise funds from financial institutions that have a positive policy - rate balance at a rate that is still negative but higher ( i. e., less negative ) than minus 0. 1 percent. these transactions will be profitable for both sides. if these arbitrage transactions take place in full, the net amount of negative - rate balances will be about 10 trillion yen. in other words, this suggests that there are incentives for financial institutions to engage in transactions in the interbank money market. in switzerland, money - market transactions are taking place at negative rates. in these cases, private banks, which have large negative - rate balances, are lenders, and major banks, which have unused zero interest rate tier allowances, are borrowers. going forward, we expect that these arbitrage transactions in the money market will gradually increase in japan as well. looking at developments in the money market since february 16, when the negative interest rate started to be applied, although there were no transactions with a negative uncollateralized overnight call rate on that day, there have been uncollateralized overnight call transactions with a negative interest rate since february 17, and the weighted average rate has been negative. meanwhile, the volume of transactions in call markets decreased from the previous reserve maintenance period. nevertheless, i believe that as financial institutions proceed with updating their computer systems and operations, and as markets become more accustomed to negative interest rates, transactions in call markets will increase. in fact, as mentioned, in switzerland and denmark,

resource utilisation will increase. inflation will rise at the same time, after being held back by a low cost pressure and a stronger krona since the financial crisis 2008 – 2009. bis central bankers ’ speeches repo rate remains low to stimulate the economy with regard to monetary policy, our assessment was that it needs to be expansionary to support economic activity and give an inflation rate in line with the target of 2 per cent. we therefore decided to hold the repo rate at 1. 5 per cent and assessed that it needs to remain at roughly this low level for just over a year, and should then be raised gradually. the deterioration in international economic prospects meant that we revised down the repo - rate path somewhat, in relation to the assessment made in april. personally, i thought that an unchanged repo rate gave a better balanced monetary policy in july than a cut would have done. monetary policy was already expansionary, and our forecast was that inflation would attain the target of 2 per cent and that the real economy would reach sustainable levels within the forecast period. i also believe that there are risks in having low interest rates over a long period of time – risks that unsustainable behaviours and imbalances will arise in connection with the build - up of debt. such risks also need to be considered in our assessments, while we try to ensure that we attain the inflation target and stabilise the real economy. having said this, we also emphasised in july that there was considerable uncertainty over future developments. as i mentioned before, we assumed in our assessment that the problems in the euro area would be managed in such a way that a deeper crisis could be avoided. if the financial unease were to escalate, the situation for monetary policy would of course be quite different and policy would probably need to be even more expansionary. however, if credible measures were put in place, confidence could also return sooner than expected, which could increase demand in the swedish economy. this might justify a higher repo - rate path. developments during the summer so, what has happened since the july monetary policy meeting? to begin with, we can note that the storm clouds are still hovering over europe. a number of important questions are currently being investigated and suggestions or announcements within various areas have been promised by september. after the european council ’ s meeting at the end of june, the sentiment on the financial markets was characterised by uncertainty over the details in the measures the council announced and the yields on