. the program has been established with the aim to create additional monetary easing effects by encouraging a decline in longer - term interest rates and a reduction in various risk premiums in a situation where there was little room for further declines in short - term interest rates. through the program, the bank – in addition to the increased purchase of jgbs just mentioned – purchases various financial assets, such as cp, corporate bonds, exchange - traded funds ( etfs ), and japan real estate investment trusts ( j - reits ), and conducts fixed - rate funds - supplying operations against pooled collateral whereby funds with a maturity of three or six months are provided at an interest rate of 0. 1 percent. as a result of the most recent increase in the program, the bank ’ s pace of purchasing jgbs will accelerate significantly from about 0. 5 trillion yen per month to about 1. 5 trillion yen. adding up jgb purchases through the program and the bank ’ s regular jgb purchases to meet the trend increase in banknote demand, conducted at a pace of 1. 8 trillion yen per month, the bank will be purchasing a large amount of jgbs until the end of 2012 at the pace of 3. 3 trillion yen per month, or about 40 trillion yen for the year. it should be emphasized, however, that the purpose of this significant scale of jgb purchases is to achieve sustainable growth with price stability, and that the bank rigidly maintains its policy of not conducting purchases of jgbs for the purpose of financing government debt. bis central bankers ’ speeches 2. ensuring financial market stability the bank has been showing its commitment to fully ensure financial market stability through implementing a variety of measures including the utilization of various funds - supplying operations. when uncertainty began to spread in the financial markets just after the earthquake, the bank provided ample funds to the markets, the total amount of which represented a historical high. the bank has also taken measures to provide financial institutions with the confidence that they can obtain sufficient funds whenever necessary. in may 2010, in response to the reemergence of strains in u. s. dollar short - term funding markets, the bank – in coordination with the bank of canada, the bank of england, the ecb, the federal reserve, and the swiss national bank – reestablished the temporary u. s. dollar liquidity swap facility, which had expired, and reintroduced a scheme that would make it possible to conduct the u. s. dollar funds -

the economy. the liquidity provided stabilised the financial system, but it also inflated asset prices. 6 the aftermath of the expansionary monetary policymaking before the crisis should serve as a reminder not to make the same mistake twice. providing an endless flow of liquidity as a kind of painkiller does nothing to tackle the root cause of the economic challenges we are facing. the second painkiller frequently administered to support financial development in the precrisis era was deregulation and a “ light touch ” in regulation and supervision. the idea behind this approach was that lenience would fuel increased investment. unfortunately, it inflated the credit bubble. solid regulation and responsible supervision is the key to limiting future bubbles. yes, we ’ ve already achieved a great deal since the crisis – basel iii and tlac at the global level ; doddfrank in the us ; the banking union in the euro area. and some are saying we ’ ve already gone too far. the evidence, however, tells a different story : it is higher standards that strengthen credit intermediation and economic development. that ’ s something worth remembering in the face of what are, intuitively, compelling claims about capital costs. these claims have been discredited by the experience gained during the crisis and by empirical evidence. 7 european systemic risk board ( 2014 ) is europe overbanked? report of the advisory scientific committee no 4 / june 2014. b s bernanke ( 2013 ) a century of u. s. central banking : goals, frameworks, accountability. speech given at the conference ‘ the first 100 years of the federal reserve : the policy record, lessons learned, and prospects for the future ’, on 10 july 2013. m bordo and j landon - lane ( 2013 ) does expansionary monetary policy cause asset price booms ; some historical and empirical evidence. nber working paper no. 19585. a admati and m hellwig ( 2013 ) the bankers ’ new clothes : what ’ s wrong with banking and what to do about it, princeton university press ; c m reinhart and k s rogoff ( 2008 ) this time is different. eight centuries of financial folly, princeton university press. bis central bankers ’ speeches in sum, these policies did not constitute a sustainable lifestyle, nor did they deliver a systematic cure. rather, they turned out to be painkillers. so the big question i ’ m asking myself is this : should we carry on treating the symptoms by