offset any potential benefits, and markets, one way or another, always find a way to circumvent them. consequently, this has not been considered a sensible course of action in the mexican case, and the country remains one of the most open to capital flows among emerging market economies. the approach i just described has allowed a flexible implementation of monetary policy in mexico with satisfactory results. let me illustrate this with the experience of recent years. in the aftermath of the global financial crisis, as in other emes, significant downward pressures on economic activity emerged in mexico. as a result, the central bank embarked on an aggressive cycle of cuts to the policy rate, which during the six - month period from january to july 2009 declined by nearly 400 basis points. external developments also played an important role in this outcome. in particular, the federal reserve ’ s lowered the target for the federal funds rate by about 500 basis points over the 15 months between september 2007 and december 2008. subsequently, following a relatively prolonged period with an unchanged monetary policy stance, the reference rate in mexico was reduced by an additional 150 basis points between march 2013 and june 2014. the combination of a negative output gap, easy external financing conditions3 ( barring the “ taper tantrum ” episode of mid - 2013 ) and a generally stable exchange rate, allowed the simultaneous achievement of record - low inflation the federal reserve adhered during most of this period to an accommodative monetary policy stance, as the target for the federal funds rate remained in the 0 - 0. 25 % range from december 2008 to december 2015, and several rounds of quantitative easing measures were implemented in this lapse. and policy interest rates. in particular, the reference rate remained constant at its lowest historical level of 3 percent for slightly over a year and a half, while overall inflation fell below the 3 percent target. 4 more recently, with the beginning of the normalization of interest rates in the united states in december 2015, an upward trend in interest rates in mexico has started. this has responded to a combination of factors, including of course the higher federal funds rate, but also a preventive response by the banco de mexico during 2016 to the potential impact of the significant depreciation of the peso on domestic prices and, since early this year, the need to avoid second round effects from an inflation spike deriving from the liberalization of energy prices, an adjustment of the minimum wage and a more evident pass - through from the exchange rate to

12 months up through august 2012, the amount of lending increased by a total of approximately 15 trillion yen for financial institutions that saw a rise in their lending. going forward, if financial institutions manage to increase their lending more aggressively, the amount of funds that the bank can provide will rise accordingly. at present, the bank is in the process of making the necessary arrangements, and we plan to release the details of this facility before the end of the year and start its operation as soon as possible. the bank ’ s aggressive monetary easing, which consists of its virtually zero interest rate policy and its purchases of financial assets through the program, coupled with measures including the government ’ s intervention in the foreign exchange market, has fended off the yen ’ s appreciation to some extent. nonetheless, we have heard the opinion that the bank ’ s monetary easing is not enough because japan ’ s economy has yet to overcome deflation. this opinion often refers to the amount of “ money ” supplied by a central bank. looking at the monetary base – which is the amount of “ money ” supplied by a central bank, percentage point changes in its ratio relative to gdp since the lehman shock have been more or less the same as in europe and the united states, where the monetary base is thought to have been increased aggressively during this period ( chart 12 ). furthermore, as japan experienced its financial crisis much earlier than other economies, the ratio of the monetary base relative to gdp also started rising in earlier years and has now reached the highest level among the advanced economies. 2 now the question is, how can we further strengthen the effect of monetary easing? in order to answer this question, i would like to discuss the monetary transmission mechanism. this can be divided into two stages. the first stage is the transmission of monetary easing effects from the realm of monetary policy to the financial environment, where firms can raise sufficient funds at low costs on the back of monetary easing. the second stage is the transmission of effects from the financial conditions to economic activity and prices ; in other words, the extent to which firms and households actually take advantage of the accommodative financial conditions to increase their investment and spending ( chart 13 ). as for the first stage of the transmission, the effect of aggressive monetary easing has thoroughly permeated the financial environment, and extremely accommodative financial conditions have been achieved both in terms of interest rates and access to financing. if the effect of aggressive easing permeates the second stage of the transmission