associated with corporate rehabilitation and realignment such as m & a finance and dip finance and of fund demand from emerging companies that challenge new areas. moreover, needs for asset management mainly by elderly people are expected to diversify and increase. changes in business models for globally active major financial institutions third, business models of globally active major financial institutions might change. specifically, the originate - to - distribute business model that had been actively used prior to the crisis will relatively decrease in number and the proportion of commercial banking business that put more emphasis on the relationship with customers is likely to increase : that is called “ back to basics. ” moreover, as business regulations such as the volcker rule will be implemented and regulation and supervision will be reviewed in order to restrain “ too - big - tofail, ” it is likely that the moves toward mere scale expansion and toward excessive risk - taking will be restrained. in terms of funding, as awareness about liquidity risk heightened considerably through the experience of the financial crisis, more emphasis would be put on retail deposits, which have more stability than short - term wholesale funding such as repo transactions. such changes in business models of globally active major financial institutions could have an impact on the business models and the competitiveness of japanese financial institutions. b. future of japan ’ s financial system : macro perspective i will next touch on how japan ’ s financial system should be in the future from a macro perspective, namely, a perspective of financial system structure. needless to say again, japan ’ s financial system has long been characterized by financial intermediation centering on banks. in this situation, from a perspective of improving the functioning and stability of the financial system, many have argued as follows. it is desirable to have not only bank - based financial intermediation but also financial intermediation through the capital market, inclusive of the so - called market - based financial intermediation. to that end, it will be necessary to increase the supply of risk money and eventually enhance the diversification of households ’ asset investment. in fact, many policy measures have been taken to bolster such moves, including enhancement in market infrastructure, improvement in market transparency, and investor protection. if we revisit the discussions based on the experience of the recent crisis, it can be summarized as follows. first, the complementarity of functioning between banks and capital market is important. while the functioning of corporate bond and cp markets declined significantly in japan during the crisis, bank lending substituted the financial

easily will deliver higher profitability, which in turn is expected to bring about further wage increases. price stability and financial system stability next, i will present my view regarding the future conduct of monetary policy. the bank has been pursuing powerful monetary easing for more than eight and a half years since the introduction of qqe in 2013. nonetheless, partly due to the impact of covid - 19, it is unavoidable that this monetary easing will be prolonged further. to achieve the price stability target of 2 percent, the bank is expected - - even after covid - 19 subsides - - to persistently continue with further effective and sustainable monetary easing, which reflects the findings of the assessment in march 2021. for monetary easing measures to have a sustained impact, maintaining the stability of the financial system is indispensable. in this regard, japan's financial system has been maintaining stability on the whole, while covid - 19 continues to have a significant impact on economic and financial activity at home and abroad. nevertheless, it is necessary to continue to pay attention to the possibility that credit costs will increase due to a delay in economic recovery at home and abroad. also, downward pressure on financial institutions'core profitability is likely to persist as a trend even after covid - 19 subsides, reflecting the prolonged low interest rate environment and structural factors such as the decrease in loan demand due to, for example, the declining population. in this situation, attention should continue to be paid to the risk of a gradual pullback in financial intermediation and to the possibility that the vulnerability of the financial system will increase, mainly as a result of financial institutions'search for yield behavior. in march 2021, the bank analyzed and assessed the impact of its monetary easing on economic activity and prices, as well as on the functioning of financial intermediation and market functioning. based on the findings, it took policy actions to conduct further effective and sustainable monetary easing. it will continue to deliberate on whether there is room for more improvement in its conduct of monetary policy by carefully weighing the positive effects and side effects of monetary easing, taking account of developments in economic activity and prices as well as financial conditions at the time. in doing so, my view is that the bank should pay due attention to the fact that side effects of monetary easing will accumulate over time. the bank will continue to conduct monetary policy in an appropriate manner so as to fulfill the two missions of achieving price stability and ensuring the stability of