Moreover, in terms of the impact on financial markets, I am also aware of concerns that, with the Bank continuing with large-scale purchases of JGBs, supply and demand conditions in the JGB market are becoming extremely tight, and that conducting the negative interest rate policy under these circumstances would have distorting effects on the JGB market and thereby cause great damage to liquidity and functioning of the market.
The second document we discussed is the final report on the effects of too-big-to-fail reforms, which updates the interim analysis, also in light of the experience of the pandemic. The key message, on which we concurred, remains that the ‘too-big-to-fail’ reforms for banks are working as intended, reducing moral hazard and systemic risk with no material side effects.