across economies. these conditions allowed japan to achieve the monetary easing effects necessary to sustain a moderate economic expansion by implementing monetary easing of a scale comparable to that of other central banks. since monetary easing through ycc is conducted mainly by controlling interest rates, ycc has the advantage that there is no crowding - out of fiscal stimulus measures, making it possible to maximize the effects of policy cooperation with fiscal policy. on the other hand, keeping interest rates at a low level has the side effect that it may impede the functioning of financial intermediation by reducing financial institutions'profitability through the narrowing of lending margins ( i. e., there may be a so - called " reversal interest rate " effect, where the impact of low interest rates is reversed ). therefore, it is important for central banks to conduct monetary policy while taking its impact on the financial system into account. looking back on the period since the introduction of ycc, japan's economy has continued to expand at a moderate pace, which implies that, at the least, the necessary degree of monetary easing was maintained. meanwhile, fluctuations in the u. s. dollar - yen exchange rate during this period remained within a narrow range. in other words, the direction and scale of monetary policies in the major economies have been quite similar, leading to a situation close to the fixed exchange rate regime shown in table 1. what is critically important is to understand that the fact that this situation came about is not a coincidence but is the result of the similarity of monetary policies of major economies. meanwhile, in most major economies, the expected acceleration in inflation so far has not occurred. given the increasingly complex mechanisms underlying general inflation, in order to avoid sudden market swings and achieve a gradual expansion of economic activity on a global basis, it seems desirable to prioritize full employment and avoid deflation ( i. e., maintain a positive rate of inflation ). this means that, even if the expected rise in inflation does not materialize, central banks should avoid implementing aggressive policy measures in the short run and instead respond gradually over time. v. the covid - 19 crisis and its policy implication japan's long experience with monetary easing, and in particular the three different regimes just described, provides important lessons. the experience of the 2008 - 2012 period suggests that monetary policy should be flexible, bold, and responsive to external shocks. moreover, the experience of the two policy regimes between 2013 and 2019 shows that, by applying the lessons of international

denied that banks ’ profits will plunge. the profitability of housing loans also warrants careful monitoring. in addition, consumer loans such as card loans and car loans are an area where potential needs exist over time. with a view to its potential, the major banks have been increasing their capital subscription to consumer credit, credit card, and consumer finance companies. as explained earlier, those affiliated companies have not contributed to increasing the profits of financial institutions, while the future developments in the area of consumer loans warrant attention. lending to small - and medium - sized firms, and provision of risk money third, fund provision to small - and medium - sized firms. firms ’ funding conditions rapidly deteriorated from the autumn of 2008 to the beginning of 2009, and have been recently improving, partly due to the recovery of cp and corporate bond markets. many small and medium - sized firms still view their funding conditions as tight, and the bank considers that the smooth fund provision to small and medium - sized firms continues to be an important challenge for corporate finance in japan. looking at the future of japan ’ s economy, how to provide risk money to small - and mediumsized firms with high technology would be a challenge for the financial system. in that case, it becomes important to apply part of households ’ ample financial assets to risk money. in japan, while the importance of venture capital has repeatedly been argued, it has not grown in a significant manner so far. providing risk money smoothly to firms that have a possibility of leading japan ’ s future economic growth is one important challenge in the area of retail banking. the bank will keep monitoring with strong interest what type of financial institution will play a role of intermediation through what type of channel. concluding remarks the current financial crisis has posed various challenges to the bank of japan. one of them is, from a macroprudential perspective and taking into account the interconnectedness between the real economy and the financial system, to analyze and assess the risk of the financial system as a whole. the bank of japan has been tackling such challenge through financial system report and others, and intends to further enhance its efforts as well as to continue to strive to properly gauge and assess the risk inherent in the financial system. on that basis, the bank considers that how to utilize such assessment in monetary policy or to utilize in further strengthening of financial institutions ’ risk management through on - site examination, off - site monitoring, and the activities of the center for advanced financial technology, would be our next