The institutions’ balance sheets could be altered for some scenarios, and not for others. For the stress test, the impact of a positive interest rate shock of 200 basis points was compared with that of a continued low-interest-rate environment. The scenario also assumes a 200 basis point increase in the probability of default and a 20% increase in the loss given default.
In relation to price developments in the future, distinct narrowing in the output gap is unlikely for the time being even though the economy appears to have stopped deteriorating. Furthermore, the decline in wages and the appreciation of the yen since autumn 1998 are likely to continue exerting downward pressure on prices. Hence, prices are expected to remain on a downtrend.