In the subsequent eight months, the Bank has been steadily pursuing this policy. Positive developments have been spreading in financial markets and the real economy, as well as in people’s mindset and expectations. The QQE has steadily been exerting its intended effects. Japan’s economy is recovering moderately, with a positive spillover from income to expenditure in the household and corporate sectors taking course.
The uncertainty about financial institutions’ potential exposure to US sub-prime-related losses and to the valuation techniques of complicated structured credit products, however, does appear to have led to a lack of confidence among banks and thus tensions in the interbank money market. The ECB immediately reacted to the market tensions and continues to contribute to the smooth operation of money markets.