Financial Conditions surrounding Firms and the Bank's Conduct of Monetary Policy Financial Conditions I would now like to explain the Bank's conduct of monetary policy (Chart 8). Let me first describe Japan's financial conditions surrounding firms, the starting point of the transmission channel of the effects of monetary policy.
Immediately after the outbreak of COVID-19 last year, precautionary demand for funds surged due to heightened uncertainties over the future, and financial positions, mainly of firms, deteriorated significantly due to a decline in sales. Financial markets at home and abroad also became significantly unstable.