1IMES Newsletter
June 2018
The Institute for MonetaryandEconomicStudies(IMES) was founded in 1982
as an internal organ of theBankofJapan,commemoration
Bank’sinofthecentennial.

TheIMES conducts a wide rangeof studies on the theoretical,institutional, and historicalaspects of monetary andeconomic issues. The IMES
also collects, conserves, andexhibits historical materials
related to monetary andeconomic issues.
Highlight of This Issue

2018 BOJ-IMES ConferenceOpening remarks



Mayekawa Lecture

Keynote speechPolicy panel discussion

The IMES Newsletter aims
to provide information about
the IMES’ activities andmajor events held by theIMES on a timely basis.

2018 BOJ-IMES Conference
The Institute for Monetary and Economic Studies (IMES) of theBank of Japan (BOJ) held the 2018 BOJ-IMES Conference, titled“Central Banking in a Changing World,” on May 30–31, 2018 at theBOJ Head Office in Tokyo.
The conference attracted about one hundred participants fromacademia, central banks, and international organizations. It focusedon central bank policies and operations that have been influenced byglobal structural changes in recent years.
The conference began with theopening remarks delivered byBOJ Governor Haruhiko Kuroda.
He emphasized that global
structural changes in recent years
have influenced not only central
bank policies, but also central
bank operations. He then raised
three important issues: (i) therecent sluggish growth in wages
and prices despite the significant
improvements in real economy,

BOJ Governor Haruhiko
Kuroda delivers his opening
remarks (Photo: Shoichi Nose)a phenomenon of “missing (wage) inflation”; (ii) developments inthe shadow banking sector and the low profitability of financial
institutions; and (iii) advances in information and communication
technologies and their application to the financial business, or“FinTech.”
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Conference participants (Photo: Shoichi Nose)

Thereafter, Kuroda
expressed his hope that
this year’s conference
would activate discussion
fromavariety
ofperspectives and also
deepen our understandingof the issues faced bycentral banks.

In the Mayekawa Lecture, Professor Raghuram G. Rajan(University of Chicago) explained why we need banking
regulation by elaborating on its theoretical background. He
reviewed how micro-prudential measures were developed inthe literature. He also pointed out the importance ofregulatory incentives that could affect the financial system.
He thereby introduced three specific topics: (i) addressing
financial stability with monetary policy, (ii) macro-prudential
regulations, and (iii) regulatory harmonization across borders.
He closed his lecture by emphasizing the importance of Professor Raghuram G. Rajan(University of Chicago) delivers thesystemic regulation and the need for implementing broad,
Mayekawa Lecture (Photo: Shoichi
robust and timely regulations across national financial Nose)
systems.
In the keynote speech, Professor Athanasios Orphanides(Massachusetts Institute of Technology, Honorary Adviser tothe IMES) reviewed the BOJ’s monetary policy that has been
implemented since the mid 1990’s and discussed practical
implications of central bank independence. He argued thatthe BOJ’s experience showed the necessity for an
independent central bank to clarify (i) the definition of pricestability and (ii) the legitimacy of assuming risks on its
balance sheet. He then insisted that the “Joint Statement ofProfessor Athanasios Orphanides the Government and the Bank of Japan” in 2013 made thoseInstituteof clarifications, and enabled the BOJ to pursue “Quantitative(Massachusetts
Technology, Honorary Adviser to theand Qualitative Monetary Easing.” He concluded byIMES) delivers the keynote speech.
highlighting the benefits obtained from the coordination ofmonetary and fiscal policy.
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Panelists and a moderator (from left): President James Bullard (Federal Reserve Bank of St. Louis,panelist), Deputy Governor David Ramsden (Bank of England, panelist), and Professor Kazuo Ueda
(Kyoritsu Women’s University and University of Tokyo)

In the policy panel discussion moderatedby Kazuo Ueda (Kyoritsu Women’s
University and University of Tokyo), James
Bullard (Federal Reserve Bank of St. Louis)
and David Ramsden (Bank of England)
discussed the causes and consequences of“missing (wage) inflation” and central
banking under the FinTech revolution.
In relation to missing inflation, President
Bullard argued that the improvement ofmonetary policy during the inflation targetingera from early 1990’s had caused a flatteningof empirical Phillips curves in advanced
economies. By employing a theoretical modelwith a structural Philips curve, he showed
under successful monetary policy the slope ofan empirical Philips curve could disappear.
He pointed out that today’s monetary
policymakers were unlikely to glean a reliable
signal for monetary policy based on empirical
Phillips curve slope estimates.
Deputy Governor Ramsden raised four
possible explanations for “missing wageinflation” in the U.K. (i) weak productivity

growth, (ii) the decline in the structural
unemployment rate, (iii) the lag between adecrease in unemployment and an increase inwage growth, and (iv) the reduction of workers’
bargaining power due to technologicaldevelopments. He concluded that the stance ofmonetary policy would be judged based not
only on labor market indicators such as wage
growth and unit labor costs but also a wider
range of indicators on demand and supplyconditions.
In relation to the FinTech revolution, Deputy
Governor Ramsden stated that the Bank ofEngland’s approach to the FinTech revolution
could be expressed using one word, “open.” Hethen argued that the financial authorities could
choose to isolate, regulate, or integrate thesechanges, taking into account the balance
between potential benefits and risks. Finally, heemphasized the need to think about broader
consumer and societal preferences, i.e., thetrends towards a more autonomous approachthat could raise questions for increased central
bank authority.
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President Bullard argued that the recent
cryptocurrency wave entailed a risk ofchanging a locally uniform currency system ineach country toward something more like aninternational non-uniform currency systemwith various drawbacks. He stated that thevalue of cryptocurrencies would inevitably bevolatile without credible promises for limits
on future issuance, and hence a non-uniform

currency system with cryptocurrencies wouldreduce the efficiency of market transactions.
In the paper presentation sessions, fourpapers, related to the topics raised in Governor
Kuroda’s opening remarks, were presented anddiscussed by conference participants from bothacademics and central bank economists.
At the first session, Dr. Jeffrey C. Fuhrer

Professor Hélène Rey (London Business School,left) presents her paper, “Global Real Rates: A
Secular Approach.” Dr. Marianne Nessén(Sveriges Riksbank, right) makes her comments.

Professor Klaus Adam (University of Mannheim,left) presents his paper “Optimal Trend Inflation.”
Professor Dr. Jan Marc Berk (De NederlandscheBank, right) makes his comments.

Professor Andrew T. Levin (Dartmouth College,left) presents his paper “Central Bank Digital
Currency and the Future of Monetary Policy.”
Professor Hiroshi Fujiki (Chuo University, right)
makes his comments.

Dr. Ichiro Muto (Bank of Japan, left) presents hispaper “Missing Wage Inflation? Estimating theNatural Rate of Unemployment in a Nonlinear
DSGE Model.” Dr. Óscar Arce (Banco de España,right) makes his comments.

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Recent Publications from the IMES

IMES Discussion Paper SeriesNo. 2018-E-6“Speed Limit Policy and Liquidity Traps” by Taisuke Nakata, Sebastian Schmidt, PaulYoo, June 2018

No. 2018-E-5“A Survey-based Shadow Rate and Unconventional Monetary Policy Effects” by Hibiki
Ichiue, Yoichi Ueno, June 2018

No. 2018-E-4“The Effects of the Bank of Japan's Corporate and Government Bond Purchases onCredit Spreads” by Kenji Suganuma, Yoichi Ueno, June 2018

No. 2018-E-3“The Implied Bail-in Probability in the Contingent Convertible Securities Market” byMasayuki Kazato, Tetsuya Yamada, May 2018

No. 2018-E-2“Central Bank Policy Announcements and Changes in Trading Behavior: Evidence fromBond Futures High Frequency Price Data” by Koichiro Kamada, Tetsuo Kurosaki, Ko
Miura, and Tetsuya Yamada, March 2018

No. 2018-E-1“Does Sovereign Risk in Local and Foreign Currency Differ?” by Marlene Amstad,Frank Packer, and Jimmy Shek, March 2018

Monetary and Economic Studies Vol.35 / November 2017
“Monetary Policy: Lessons Learned and Challenges Ahead
Summary of the 2017 BOJ-IMES Conference Organized by the Institute for Monetary and Economic
Studies of the Bank of Japan” by Ko Nakayama, Shigenori Shiratsuka

“Opening Remarks of the 2017 BOJ-IMES Conference Organized by the Institute for Monetary andEconomic Studies of the Bank of Japan” by Haruhiko Kuroda

“The Mayekawa Lecture: Some Reflections on Japanese Monetary Policy” by Ben S. Bernanke“Rethinking the Power of Forward Guidance: Lessons from Japan” by Mark Gertler

“Fiscal Conditions and Long-term Interest Rates” by Koji Nakamura, Tomoyuki Yagi

IMES Newsletter June 2018
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IMES Newsletter June 2018