The Bank of Japan Act stipulates that the purpose of the Bank is to carry out currency and monetary control as well as to contribute to the maintenance of the stability of the financial system, and therefore the Bank is responsible for taking care of both tasks equally (Chart 6).
Looking back, the following two cycles have often synchronized: the cycle of economic activity, or the output gap, and the financial cycle – in other words, the buildup of financial imbalances and their collapse. That is because of a feedback loop in which changes in the output gap and changes in the financial cycle have reinforced each other, leading to larger changes for both.