On the fiscal side, the reform of the Stability and Growth Pact and the new Fiscal Compact are specifically designed to catch imbalances earlier. A key focus of the SGP reform was to strengthen the so-called “preventive arm” – for example, sanctions are now possible for noncompliance with medium-term budgetary objectives.
As for financial developments, the overnight call rate (uncollateralized) remained on average slightly below the official discount rate following monetary adjustments by the Bank of Japan. Long-term interest rates continued to rise with some fluctuations in the first half of 1996, but fell sharply in the second half.