of the above points. it is also important to promote structural reform in order to assure the economy ’ s sustained growth in the medium term. with regard to prices, import prices continue to rise due to the bottoming out of international commodity prices such as crude oil prices. the pace of decline in domestic wholesale prices is slowing due to a rise in prices of some products closely related to international commodities, such as those of petroleum products. on the other hand, corporate service prices continue to decline. consumer prices remain weak. in relation to price developments in the future, there is a possibility that prices overall, which have been on a downtrend, will temporarily level off reflecting the rise in import prices. however, distinct narrowing in the output gap is unlikely for the time being even though the economy has stopped deteriorating, and wages continue to decline. thus, downward pressure on prices is expected to remain. in the financial market, the overnight call rate has stayed at nearly zero, and many financial institutions have become confident about the availability of liquidity. interest rates on term instruments have declined further, reflecting the market ’ s view that monetary easing will continue for some time. the japan premium has almost disappeared. furthermore, the yield spread between government bonds and private bonds – – bank debentures and corporate bonds – – has narrowed. yields on long - term government bonds have risen since late may to the current level of around 1. 6 - 1. 7 percent. stock prices, which had generally been in the range of 16, 000 - 17, 000 yen, have recently risen and exceeded 17, 000 yen. the amount outstanding of funds in the call money market has continued to decrease. to date, this has not led to any difficulty in funds settlement, but close attention should be paid to future market developments. with regard to corporate finance, private banks have basically retained their cautious lending attitude. however, constraint that had been caused by severe fund - raising conditions and insufficient capital base has eased considerably. under these circumstances, major banks have gradually become more active than before in extending loans, especially for projects involving relatively small credit risks. however, credit demand for economic activities such as business fixed investment remains weak. in addition, firms ’ moves to increase their on - hand liquidity are apparently settling down. as a result, credit demand in the private sector has weakened further. money stock ( m2 + cds ) has recently been showing a slightly higher year - to - year growth rate, mainly because firms ’ curtail

##ctioning, they could also reflect more structural underlying problems that monetary policy measures cannot resolve. if the central bank were to respond to the latter, it would intervene in areas where other players have a responsibility to act. the key challenge is therefore to assess which circumstances apply, before deciding on the most appropriate instrument or set of instruments to activate. for a discussion of these results in a broader context, see bonam, d., galati, g., hindrayanto, i., hoeberichts, m., samarina, a. and i. stanga ( 2019 ). inflation in the euro area since the global financial crisis. dnb occasional study no. 3. 5 see for instance gertler and karadi ( 2015 ), monetary policy surprises, credit costs, and economic activity, american economic journal, 7 ( 1 ), 44 ‐ 76. it is important to note that, next to the higher level of uncertainty, employing unconventional tools will also likely carry larger risks, for instance in terms of longer - run side – effects. i have therefore argued before that policymakers should consider exercising more caution in deploying unconventional instruments. 6 in times of severe market stress with equally severe frictions, however, the advantages of more aggressive action might outweigh the disadvantages of higher uncertainty and larger risks. specific challenges for the ecb against this backdrop, let me focus on two additional challenges related to the institutional context within which the ecb operates. the first challenge here is provided by the observation that the ecb has to operate in an incomplete monetary union with a more convoluted process of policy coordination. the design of our economic and monetary union remains a compromise between limited risk - sharing and a large degree of national liability and control. this confronts the ecb with more institutional restrictions than other central banks. it has to deal with 19 different fiscal counterparts, for instance, all of which face different sovereign risk premia. this makes the purchase of government bonds more fraught than in other jurisdictions. to what extent further steps toward fiscal risk - sharing should be taken, is very much a political question. from my perspective, i can only note that more effective fiscal stabilization would have the potential to make the ecb ’ s job significantly easier. the second challenge specifically faced by the ecb relates to the euro area ’ s financial architecture. within the euro area, banks play a dominant role. pervasive banking sector weaknesses like non - performing loans and