Opening Remarks
Kunio Okina
Director, Institute for Monetary and Economic Studies
Bank of Japan

It is a great pleasure to welcome all of you to the Bank of Japan today. ThisConference is the sequel to the First Joint Central Bank Research Conference heldin Washington D.C., November 1995. The First Conference discussed the theoretical and technical issues regarding risk measurement methods and systemic riskmechanisms. The Second Joint Central Bank Research Conference on Risk Measurement and Systemic Risk is organized by the Bank of Japan in collaboration
with the Bank for International Settlements, the Bank of England, the Board ofGovernors of the Federal Reserve System, and the Federal Reserve Bank of NewYork. It is being held as part of continuing efforts by central banks to conduct
research into the robustness of financial systems and market mechanisms understress.
At our Bank, the staff researchers at the Institute for Monetary and Economic
Studies worked to prepare this Conference in close collaboration with the researchers of co-hosting institutions. As Director of the Institute, I greatly appreciate the enthusiastic devotion of the staff researchers and researchers of co-hosting
institutions in organizing this Conference and wish to extend my heartful welcome to all of you who have participated.
The Institute for Monetary and Economic Studies was established in 1982 tocommemorate the centennial of the Bank of Japan. The late Haruo Mayekawa,
who was the Governor of the Bank at the time, proposed the establishment of theInstitute in the hope that it would enhance the ability of basic researches. The
following are excerpts from his remarks presented at the inauguration of theInstitute.
“Basic researches can be compared to roots of a tree. They may not enjoy ahigh profile but are very important. A clear theoretical understanding of thefinancial and economic mechanisms is the fundamental basis for understanding
the essential forces behind each phenomenon. This will help us recognize, forexample, what type of side-effects myopic policy actions may entail in the longrun.”
What the late Mayekawa had in mind at the time, I believe, was mostly related
to monetary policy management. But central banks that have hard times in finding
the extremely narrow path to achieve both systemic risk aversion and moral
hazard prevention may read Mayekawa’s comment in the context of the relation-

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ship between prudential policy and basic research.
It is very difficult for central bank researchers engaging in studies of financial
market mechanisms and system design to seek an adequate balance between
intensive theoretical analysis and pragmatic market flavor and also incorporate intheir studies an extensive and global point of view. In the past few years, ourInstitute and co-hosting institutions have vigorously tackled this difficult task. We
would like to take advantage of this Conference as a significant step forward,
continue to pursue such extensive and intensive research and contribute to theevolution of financial markets.
The focus of our studies is vividly reflected in the program of this Conference.
The discussions are kicked off by Session One titled “Sources of Systemic Disruption and Contagion,” followed by four consecutive sessions that consider
market microstructure and market participants’ behavior and by Session Six thatsheds light on the relationship between “Systemic Risk and Central Banking.”
The last session will conclude the whole debate of this Conference with a panel
discussion joined by market participants, academic scholars and central bankofficials.
I hope the discussions promote “a better understanding of market dynamics
during periods of stress,” as is stated in the Conference main theme, and provide
effective clues for central banks in understanding developments in the market anddetermining the appropriate actions during periods of stress in the financialsystem. If it proves to be so, then we can regard Mayekawa’s wishes expressed at
the start of the Institute as mission accomplished in the most successful way.
I am confident that the next two days will witness productive and exciting
debate that meets our expectations. I sincerely hope that our efforts pave the way
for various intellectual circles of continuing dialogue, including the Third Joint
Central Bank Research Conference, to develop and help to resolve many of theproblems that confront us.
Thank you very much.