Impact of Climate Change on the Financial System Next, I would like to consider how climate change will affect the financial system. In assessing the impact of climate change on the financial system, two types of risks need to be considered: physical risks and transition risks.
It is not a question of either monetary easing or structural reforms – they are complementary to each other. With regard to the first arrow, monetary policy, the Bank of Japan introduced the price stability target in January 2013 with the aim of achieving 2 percent inflation in terms of the year-onyear rate of change in the CPI.