bank will continue its jgb purchases with broadly the same amount as before, and in the case of a rapid rise in long - term interest rates, it will nimbly respond by, for example, increasing the amount of jgb purchases. such jgb purchases will be regarded as ways to avoid bringing about discontinuous changes, instead of as an active monetary policy tool. furthermore, the bank has discontinued purchases of exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ), which had been rarely made following the improvement in market environment. with these changes in the monetary policy framework, i believe that the bank has exited from the so - called new phase of monetary policy implemented to date, which included the negative interest rate policy and yield curve control, and has taken its first step toward the normalization of monetary policy. it will continue to conduct monetary policy as appropriate in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the 2 percent price stability target. given the current outlook for economic activity and prices, the bank anticipates that accommodative financial conditions will be maintained for the time being. b. a look back at the past 25 years : a state without meaningful interest rates as the bank has taken its first step toward the normalization of monetary policy, let me briefly look back at the bank's monetary easing, which it has been carrying out over a long period, since the late 1990s, when japan's economy fell into deflation. i would also like to consider the functions of interest rates - - the main vehicle of monetary policy - - while sharing what i perceived as a financial practitioner before becoming a member of the bank's policy board. let me note developments in short - term interest rates, the conventional monetary policy tool. the uncollateralized overnight call rate hovered in the range of around 4 - 8 percent from the late 1980s to the early 1990s, a period before the collapse of the bubble economy ( chart 8 ). in the late 1990s, however, it fell to around 0. 5 percent, ushering japan into a state without meaningful interest rates. subsequently, with the start of the bank's zero interest rate policy and its introduction of the negative interest rate policy, the rate declined to 0 percent and then into negative territory. meanwhile, the bank also has kept long - term interest rates at low levels through unconventional measures

, including its commitment aimed at generating policy duration effects, quantitative easing, and yield curve control. chart 8 : market interest rates and consumer prices 10 % short - term interest rate ( uncollateralized overnight call rate ) long - term interest rate ( 10 - year jgb yields ) cpi ( less fresh food ), y / y chg. - 2 - 4 cy85 note : figures for the cpi ( less fresh food ) exclude the effects of the consumption tax hikes. sources : ministry of finance ; ministry of internal affairs and communications ; bank of japan. amid sluggish economic growth and mounting financial instability in the wake of the bubble's collapse, i think that monetary easing was effective to some extent in supporting the economy in the course of moving into the state without meaningful interest rates. regarding the effects of further monetary easing once japan reached that state, it is true that borrowing firms experienced a certain advantage in terms of lower funding costs, and that there were positive effects in terms of higher stock and real estate prices and a correction of the excessive appreciation of the yen. however, looking back, i had little sense that a marginal, few tenths of a percentage point decline in interest rates stimulated business fixed investment or otherwise invigorated corporate activity. my understanding is that the function of interest rates - - in terms of raising or lowering interest rates to adjust demand and affect prices - - was limited in the state without meaningful interest rates. various side effects have also been caused by unprecedented monetary easing carried out over such a long period of time. side effects themselves are unavoidable, and policy decisions should be made based on the balance of positive effects against side effects. having said that, i would like to note two side effects relating to interest rate functions that i find concerning ( chart 9 ). chart 9 : side effects relating to interest rate functions in a state without meaningful interest rates ( 1 ) weakening of the hurdle rate function of interest rates ( 2 ) weakening of the signaling effects of interest rates the hurdle rate function acts to urge firms to concentrate their business resources to businesses with high added value that generate profitability that is higher than borrowing interest rates, thereby stimulating business metabolism. ⇒ in a state without meaningful interest rates, it is likely that the channeling of funds into businesses with relatively low productivity has impeded advances in business metabolism. the level of long - term yields on jgbs and how it changes provide a signal for how the market sees factors such as the