Let me add a few words about the Bank’s bitter experience in oft-quoted underwriting of government bonds in the early 1930s when the veteran Finance Minister Korekiyo Takahashi initiated it. Though some commentators refer to this episode at times in their favor, they do not necessarily recognize a big difference between financial and economic conditions at that time and those at present (Slide 9).
First, conditions in the financial market were tight on the eve of the Bank’s underwriting of government bonds in the early 1930s. The overnight call rate was 6.6 percent in December 1931, compared with the current level of 0.07 percent. The long-term interest rate was 5.9 percent in December 1931, compared with the current level of 1.14 percent.