judged that price stability was in sight, and that the judgment would be based on the “ understanding of medium - to long - term price stability. ” third, taking into account that there was little room for a further decline in short - term interest rates, the bank established the asset purchase program, which aimed at purchasing various financial assets – namely, government securities, corporate bonds, cp, etfs, and j - reits – with a view to encouraging a decline in longer - term market interest rates and various risk premiums. this is a quite extraordinary and unconventional monetary policy package that includes the bank ’ s commitment to the continuation of the virtually zero interest rate policy, balance - sheet expansion, and purchases of risk assets. when the package was introduced, on the back of the slowdown in overseas economies and the sharp appreciation of the yen, business and household sentiment deteriorated and asset prices including stock prices were sluggish. correcting the sentiment and risk - taking appetite that have excessively deteriorated in the markets is expected to produce sustained effects on lowering risk premiums. in fact, in the period after the introduction of comprehensive monetary easing until the earthquake, risk premiums generally declined, as seen in the rise in stock prices and reit prices. it is also expected that the bank ’ s bold measure to encourage risk taking will boost firms ’ “ animal spirits, ” thereby leading to an increase in japan ’ s growth potential and an improvement in productivity. also, in the united states, in the period following the lehman crisis until the introduction of a large - scale asset purchase program – the so - called “ quantitative easing ii ” – in november of 2010, unconventional monetary easing measures were implemented four times. in particular, bis central bankers ’ speeches the decision to purchase 600 billion dollars of longer - term treasury securities in november of 2010 has produced some effects through the decline in long - term interest rates and borrowing costs. it also appears to have had the effect of boosting stock prices through moderating overly pessimistic market views on the u. s. economy seen from the summer of 2010 and correcting the trend of excessive risk aversion, thereby continuing to affect risk premiums requested by market participants. as the dollar is the world ’ s key currency, monetary easing in the united states may have another global transmission channel. specifically, as a result of the federal reserve ’ s commitment to the virtually zero interest rate policy as a policy action after the lehman crisis, economies that have a strong

on may 15, the nikkei stock average plunged by 1, 015 yen from the previous day. this rate of decline was the third largest in history, following only the declines recorded on black monday in 1987 and after the failure of lehman brothers in 2008. moreover, in the foreign exchange market, while the yen depreciated immediately after the earthquake occurred, it then appreciated – reflecting the trend of risk aversion – and reached the range of 76. 0 – 76. 5 yen against the u. s. dollar in the early morning of march 17. subsequently, due mainly to the concerted intervention by g - 7 countries on friday, march 18, the yen has been hovering around 80 – 81 yen against the u. s. dollar and stock prices have also recovered somewhat. b. economic activity as for the effects of the earthquake on economic activity, the damage has been geographically widespread, with social infrastructure including ports and roads having been heavily damaged in the tohoku region, and some large - scale factories being damaged in the tokyo metropolitan areas. it is expected that a return to normal for the distribution system will take some time and that concerns regarding stable power supply, including in the metropolitan areas, will continue. in the meantime, restoration efforts have been made day by day. in this situation, the following could be pinpointed, albeit qualitatively, as three future effects. first, for some time, the effects of the damage will be seen substantially on the supply side, including production capacity, which will have an impact on economic activity, mainly in production and distribution. since there are many parts manufacturers for automobiles and electronic devices in the quake - stricken areas, supply chains at home and abroad will be forced to be cut off, albeit temporarily. second, uncertainty over the future could put downward pressure on economic activity through a deterioration in household and business sentiment. and third, while various forms of demand associated with restoration should emerge in the medium term, the timing and size of such demand is uncertain at present and quite difficult to envisage. while it is difficult to quantitatively gauge the effects of the earthquake at present, it is very much a situation in which the restoration of lifelines, utilities, and distribution has been slow, given that the earthquake was the biggest on record for japan and accompanied by enormous tsunami. with that in mind, at least the extent to which economic activity will be pushed downward from the supply side could be larger and might be prolonged compared with