Masaaki Shirakawa: Technological innovation and central banks
Speech by Mr Masaaki Shirakawa, Governor of the Bank of Japan, at the Graduate School
of Economics of Nagoya University, Nagoya, 2 September 2008.
* * *
Introduction
I am very honored to have the opportunity to speak here at the Graduate School of
Economics of Nagoya University. My speech today deals with the topic of technological
innovation and central banks. The choice of the topic is influenced in part by the fact that
Nagoya is known as a center of manufacturing and technological innovation. Another reason
is that, for central banks to make appropriate policy judgments, it is increasingly important to
take account of changes brought about by technological innovation and to actively take
advantage of such innovation.
I. Functions and business operations of a central bank
A. Functions of a central bank
Before discussing the topic of technological innovation, let me first provide you with an
overview of central bank functions.
The term "central bank" will probably remind you of banknote issuance. Textbooks on
macroeconomics and banking and finance describe central banking operations such as the
conduct of monetary policy and the "lender of last resort" function. This may raise the
questions of why a single institution, a central bank, is responsible for these wide-ranging
activities, and also why a bank, instead of a government office, is responsible for them.
To find the answers to these questions, we should first understand that issuing money, or
banknotes to be precise, is the most fundamental function of a central bank. The Bank of
England, one of the oldest central banks in the world, was established in 1694 as a private
bank. In those days, banknotes were issued by several private banks. However, through
competition among banks, the function of issuing banknotes was gradually monopolized by
the Bank of England. In 1844, it was legislated that the Bank of England be the sole issuer of
banknotes, and it gradually established itself as a present-day central bank. Similarly in
Japan, private banks issued their own banknotes in the early Meiji Period (around 1870). But
to solve the complexities involved in having multiple currencies, the Bank of Japan was
established in 1882 as the only institution to issue banknotes.
As history shows, the most basic central bank function is to issue banknotes, which are
recorded as its liabilities. To enable the public to use with confidence and convenience the
banknotes it issues, public confidence in the currency must be secured. And to secure such
confidence, the following two conditions must be met. First, circulation of the currency and
the functioning of the settlement and financial systems that support it must be reliable and
efficient. The "lender of last resort" function that I mentioned at the beginning is one of the
functions of a central bank to maintain financial system stability. Second, the value of the
currency must be stable, that is, price stability must be maintained. A central bank conducts
monetary policy to fulfill this condition.
As I have discussed thus far, various central banking operations work to secure public
confidence in the currency, with the function of banknote issuance as the starting point. As I
will describe in greater detail later, these central banking operations are carried out through
banking activities.
B. Central banking operations
1. Provision of cash and settlement services
Chart 1
Settlement via Bank of Japan (BOJ) Current Accounts
Goods/Services
Individual X Firm Y
Deposits
Withdrawals
X's Account
Y's Account
Bank A Bank B
Deposits
Withdrawals
Funds
transfer
Bank A's Current Bank B's Current
Account Account
BOJ
Let me explain central banking operations in detail. I will start with the central banking
operations of supplying cash and providing settlement services. The Bank, through its
network consisting of the Head Office, branches, and local offices, arranges that cash is
circulated throughout the country. In addition to cash, the Bank provides current accounts to
private financial institutions, whose balances can be exchanged for banknotes at any time
(Chart 1). Just as in the case of an individual holding an account with a private bank and
obtaining loans, private banks and securities companies hold current accounts with the Bank
and borrow funds from the Bank. Many of you may pay utility bills or pay for items you
purchased by using funds transfer or remittances through private banks. Banks that receive
such requests settle these payments among themselves by transferring funds via their
current accounts with the Bank. The amount of funds settled via the current accounts with
the Bank is increasing steadily and currently totals around 120 trillion yen per business day
(Chart 2). Moreover, the amount of funds settled also fluctuates very much within a day. For
the efficiency and safety of such settlement via the Bank's current account, the Bank
operates a computer network system called the Bank of Japan Financial Network System, or
BOJ-NET for short.
Let us now see how a central bank supplies funds (Chart 3). When the Bank extends loans
to financial institutions or buys securities such as Japanese government bonds (JGBs) from
them, funds are credited to these institutions' current account with the Bank. Such operations
are called "funds-supplying operations." When cash becomes necessary at these institutions
to meet customers' withdrawals, financial institutions obtain cash by withdrawing deposits
from their current account with the Bank. This is the overall picture how cash is put into
circulation.
These funds-supplying processes can be outlined and explained by changes in the balance
sheet of the Bank (Chart 3). When the Bank, as in the example I have just given, supplies
funds by extending loans to financial institutions or buying JGBs, such loans or JGBs
represent an increase in its "assets." At the same time, though, the funds thus supplied
represent an increase in its "liabilities," while for the financial institutions they represent an
increase in their "assets" in the form of increased current account deposits with the Bank or
banknotes. What should be stressed here is that the money is supplied through the banking
activities of the central bank, in other words, the execution of transactions as a bank.
Chart 2
Value Settled via BOJ Current Accounts
Average Daily Value Settled Distribution of Value
tril. yen
tril. yen
Settled on June 30, 2008
140 20
120
15
100
80
10
60
40
5
20
0
0
17:00
2001 02 03 04 05 06 07 08 9:00 11:00 13:00 15:00
Note: Data for 2008 are the average for the January-July 2008 period. Note: Value settled in each ten-minute period.
Chart 3
Funds-Supplying Operation by the BOJ
Supply of 30 billion yen by the BOJ through outright purchase of Japanese government bonds (JGBs)
30 billion yen in cash
Bank A
BOJ
JGBs worth 30 billion yen
Bank A's balance sheet
BOJ's balance sheet
(Assets) (Liabilities) (Assets) (Liabilities)
bil. yen bil. yen
BOJ current account 0 30
JGBs 0 30 BOJ current account 0 30
JGBs 30 0
Withdrawal of 10 billion yen by Bank A from BOJ current account after the operation
BOJ's balance sheet Bank A's balance sheet
(Assets) (Liabilities) (Assets)
(Liabilities)
bil. yen bil. yen
Banknotes 0 10
JGBs 30 Banknotes 0 10
BOJ current account 30 20
BOJ current account 30 20
JGBs 0
2. Maintenance of financial system stability
I would now like to discuss the second item on my list of central banking operations, which is
the maintenance of financial system stability. As I mentioned earlier, means of payment
familiar to households and firms, besides cash, include funds transfers between bank
accounts. A part of private bank deposits, such as ordinary deposits, is also called "deposit
money," and they function as currency based on the assurance that such deposits can be
exchanged for banknotes issued by the Bank at any time.
Before proceeding further, let me briefly define terms such as "cash" and "money," since they
have been used so far without a strict definition (Chart 4). "Cash," which consists of Bank of
Japan notes and coins in circulation, amounts to around 80 trillion yen. The sum of current
account balances at the Bank and Bank of Japan notes in circulation is called "central bank
money." The amount of "deposit money" such as demand deposits held by households and
firms is around 400 trillion yen, significantly larger than the outstanding amount of cash.
Money stock, which is the total of cash, deposit money, and "quasi-money" such as time
deposits, all held by households and firms, is around 1,000 trillion yen.
Chart 4
Classification of "Money"
Central Bank Money
(yen, average amounts outstanding in July 2008)
BOJ Current Account Balances 7.6 tril.
Monetary
Base
Bank of Japan Notes in Circulation 75.7 tril.
87.9 tril.
Coins in Circulation 4.5 tril.
---------------------------------------------------------------Total: Cash in Circulation 80.2 tril.
Money Stock*
(M3)
1,038.7 tril.
Deposit Money* Demand Deposits, etc. 408.5 tril.
Time Deposits, etc.
Quasi-Money* 534.2 tril.
---------------------------------------------------------------Total: Private Bank Deposits* 966.5 tril.
Deposits of financial institutions and the
Nominal GDP of Japan in fiscal 2007: 515 tril. yen *
central government are not included.
The present-day currency system is built on a complex network consisting of the central
bank, financial institutions that provide deposit money, and financial markets where financial
institutions carry out their activities. Therefore, to secure the ease of use of money and its
value, maintenance of financial system stability - the stable functioning of financial
institutions and financial markets - is essential. Failure of one financial institution to meet its
payment obligations may lead to problems for other financial institutions that had been
expecting the transfer of funds from the troubled institution, and this may lead to a chain
reaction of defaults, that is, the materialization of "systemic risk." In order to prevent the
materialization of such systemic risk, central banks may temporarily extend necessary funds
to financial institutions facing funds shortages. This is called the "lender of last resort"
function of the central bank. In the period from the latter half of the 1990s to the early 2000s,
when Japan's financial system was in turmoil, the Bank extended such emergency loans, the
so-called Nichigin Tokuyu, to financial institutions. This is an example of the central bank
assuming the role of lender of last resort.
In addition, to prevent the materialization of systemic risk, central banks should always
monitor whether activities of financial institutions and the functioning of the payment and
settlement system are sound, and provide advice as necessary. To this end, the Bank is
continually monitoring the situation in financial institutions and in financial markets. The Bank
also conducts on-site examinations of financial institutions, in which the Bank's staff visit the
premises of these institutions to examine in detail their financial soundness and risk
management.
3. Conduct of monetary policy
The last item on my list of central banking operations is the conduct of monetary policy,
which aims at maintaining stability in the value of the currency, in other words, at maintaining
price stability. Central banks maintain price stability through controlling the amount of
currency they supply and the level of interest rates, that is, the price of money. If the Bank
supplies abundant funds to the market, the market interest rate - the uncollateralized
overnight call rate - will decline, reducing the funding costs of financial institutions. This will
influence other interest rates such as those on loans to households and firms. Through the
change in interest rates, the cost of funds necessary for the economic activities of firms and
households will change, and this will stimulate overall economic activity. As a result, this will
alter the economy's supply and demand balance of goods and services, and will in turn affect
prices.
Monetary policy is not enforced by legislation or through administrative discretion. Rather, as
I have explained, it is conducted through the central bank's banking operations, with private
financial institutions as its counterparts.
As we have seen so far, the various roles played by the central bank are conducted through
its banking operations, and this is the very reason why they are undertaken by a bank
instead of a government office.
II. Technological innovation and the Bank of Japan
A. Changes brought about by technological innovation
Central bank functions, which we have just looked at, have differed from country to country
and from time to time, but are now well established in the major countries. However, the
specifics of central banking operations enabling central banks to fulfill their role have been
changing continually. Especially in recent years, the environment surrounding central banks
has altered significantly and rapidly through economic globalization, the globalization of
financial markets, and advances in financial engineering techniques such as those in the field
of derivatives. These changes have been driven by technological innovation particularly in
information and communications technology. In view of such changes in the environment, the
Bank has been making efforts to properly conduct central banking operations that proactively
pursue the achievement of its mission. Let me introduce to you the efforts that the Bank has
been making with regard to its three central banking operations that I described earlier.
B. Technological innovation and central banking operations
1. Provision of cash and settlement services
My first topic with respect to central banking operations is the provision of cash and
settlement services.
a. Provision of cash
What is most important in securing the public's confidence in the use of money is to ensure
their confidence in cash. The issuance of paper money, that is, of banknotes, in itself is the
Yamada
result of technological innovation. The oldest paper money in Japan is said to be the
Hagaki, which was circulated near Nagoya, in the Ise Yamada area (now Ise City, Mie
Prefecture) around the 1600s [References 1 and 2]. The history of paper money can also be
said to be the history of anti-counterfeiting, and at the Bank we continually examine the
authenticity of cash and carry out research and development on anti-counterfeiting
technologies. Banknote counterfeiting increased rapidly in the 2000s: the annual number of
counterfeit notes detected surged from previously several hundreds to approximately 26,000
in 2004. This is due to the wider use of digital imaging devices such as color copiers and
printers, and counterfeit notes have become even more sophisticated with the further
technological development of such devices.
Technological innovation is partly responsible for the increase in counterfeit banknotes, but
at the same time it also contributes to providing anti-counterfeiting measures. Banknotes
incorporate many security features such as meticulous designs, watermarks, and
luminescent ink that prevents the reproduction by color copiers or similar devices. The new
series banknotes issued since 2004 are equipped with state-of-the-art security features
(Chart 5) [References 3 and 4]: one is a hologram at the lower left corner of 5,000 and
10,000 yen notes, which changes its color and pattern when the notes are tilted. Another
feature is intaglio printing, and the ink on the new series notes is raised higher than the ink
on the previous ones. The number of counterfeit banknotes has clearly decreased due to the
issuance of the new series notes equipped with such high security features. Only one out of
one million banknotes in circulation is counterfeit in Japan, which is very low compared to
one out of 10 thousand in the United States. This is attributable to the high sophistication of
banknote production technologies in Japan. However, the Bank needs to make persistent
efforts to deal with the rapid progress in technologies that make counterfeiting possible.
Given the globalization of currency counterfeiting, the Bank has been conducting joint
research on anti-counterfeit technologies with other central banks, law enforcement
agencies, and manufacturers of cash handling machines.
Chart 5
Security Features of the Bank of Japan Notes
Security Features of 10,000 Yen Note
Pearl ink
Luminescent ink
When viewed from different
The Governor's seal on the
angles, a semi-transparent
front side and some parts of
pattern printed with pink
the background pattern
pearl ink appears in the
fluoresce under ultraviolet light.
blank areas of the left and
right margins of the front of
the note.
Intaglio printing
Raised printing is used for
some features of the note.
Latent image
Watermark-bar-pattern
When the banknote is viewed from a
When the banknote is
certain angle, the number "10000"
held up to the light,
appears on the bottom left of the front
three vertical
Hologram
side, and the word "Nippon" on the
When the banknote is tilted, the color and watermark bars
top right of the back side.
pattern of the design change. become visible. This
feature is more difficult
to reproduce with
personal computers or
color copiers than the
traditional watermark.
Various types of electronic money have been introduced and used as a new means of retail
payment. However, these types of electronic money cannot immediately replace cash in
terms of general acceptability and anonymity, both of which are characteristics of cash, as
evidenced by the fact that their use is restricted mainly to small-value retail payments and
closed networks. A recent survey conducted by the Bank shows that the outstanding value of
electronic money is approximately 77 billion yen, equivalent to only 0.1 percent of the
outstanding value of cash (notes and coins) and 1.7 percent of that of coins [Reference 5].
With the recent rapid increase in its use, however, electronic money seems to have become
widely established as a means of small-value payments. The Bank has been working on
research and analysis on electronic money, paying due attention to how such a new means
of payment will change the concept of money and the design of payment and settlement
systems, and how these changes may affect the Bank's policy and business operations in
the future. In addition, the Bank, as the secretariat of Japan for the Technical Committee for
Financial Services of the International Organization for Standardization (ISO), participates in
the standardization of information security technologies such as cryptography and
biometrics, and the coding of message transmissions among financial institutions. Making
use of the results of these efforts, the Bank supports Japan's financial industry to take
advantage of new information technologies.
b. Enhancement of settlement services
Reflecting the progress in information processing technology and the increase in financial
institutions' need for more advanced settlement services, the Bank has also been working to
improve the safety and efficiency of settlement via current accounts at the Bank, which is
another means of settlement the Bank offers. I will briefly explain the history of large-value
interbank funds settlement as a good example of how technological innovation has
contributed to the evolution of financial transactions.
Most central banks, including the Bank of Japan, used to conduct interbank settlements on a
net basis at designated times during the day. The settlements between private financial
institutions are completed by transferring funds between current accounts that they hold with
the Bank. In this settlement mode, called "designated-time net settlement," funds transfers
were made at designated times of the day, four times per day in Japan. At each designated
time, the net settlement position of each financial institution was calculated simultaneously
and its account at the Bank was credited or debited. With this settlement mode, financial
institutions need only the funds equivalent to their net debit positions at the time of
settlement, and thus, it is an efficient mode from the viewpoint of the management of liquidity
and business operations. Under this mode, however, if a single financial institution in the
system were to fail to meet its obligations, all payments would inevitably be suspended. In
the worst case, this would lead to a chain of defaults at financial institutions. Since the total
daily value of settlement via the current accounts at the Bank is substantial, reaching around
120 trillion yen, the effects of this risk could be grave.
In order to reduce such risk, in 2001, the Bank converted the designated-time net settlement
to a settlement mode in which funds transfers are made immediately and individually. This
mode is called "real-time gross settlement (RTGS)." In RTGS, each payment instruction sent
by financial institutions for a funds transfer through current accounts at the Bank is settled
immediately and individually upon receipt. Therefore, negative effects of one financial
institution's failure to pay would be limited to counterparties to that institution and would be
minimized for other institutions and the overall settlement system. While this is a
considerable advantage, there is an issue specific to RTGS that need to be addressed.
Namely, it requires financial institutions to prepare larger amounts of intraday liquidity for
settlement compared with the designated-time net settlement. In the current RTGS mode, if
each and every financial institution holds back its payments until it receives payments from
others, there is a possibility that all system participants would end up short of funds and
settlements would not be processed (Chart 6). If such behavior became widespread, it could
lead to gridlock, and smooth settlement, the aim of RTGS, would not be achieved.
The breakthrough in addressing this issue was the substantial progress in information
processing technology. The Bank has been working on the implementation of the
nextgeneration RTGS (RTGS-XG) project, and is planning to introduce new functions, "queuing
and offsetting mechanisms," into the BOJ-NET Funds Transfer System in October 2008
[Reference 6]. The "queuing mechanism" will place payment instructions in the BOJ-NET
central queue. The "offsetting mechanism" will then identify sets of payment instructions in
the queue that can be offset simultaneously and settle these individually, as in RTGS. The
"offsetting mechanism" will carry out bilateral offsettings continuously throughout the day,
and multilateral offsettings four times a day. The RTGS-XG project, therefore, aims to
achieve efficient settlement by maintaining the advantage of the RTGS mode, its stability,
while reducing the liquidity necessary for settlement. The results of running tests of
RTGSXG, in which many financial institutions participated, show that the aim of the project, that is,
improving the efficiency of settlement and minimizing the liquidity necessary for settlement,
will be achieved with the introduction of the above mechanisms (Chart 7). RTGS-XG was
made possible with the increase in information processing capacity, and this is a good
example of how technological innovation has contributed to improving the safety and
efficiency of financial transactions.
Chart 6
Gridlock in the BOJ-NET RTGS System
Current BOJ-NET RTGS System
- In order to send a payment instruction, each bank needs
to have a sufficient balance in its BOJ current account.
Payment instruction
- All three banks in this example do not have sufficient
balances.
30
- If each bank waits for the other to pay first, gridlock
Bank A Bank B
occurs, and none of the payment instructions will be
Balance: 10 Balance: 0
settled.
20
40
New BOJ-NET RTGS System
- If a bank does not have a sufficient balance in its BOJ
Bank C
current account, the payment instruction will be stored in a
Balance: 20
centralized queue.
- The system will identify sets of payment instructions in the
queue that can be settled when taking into account
incoming payments as a source of liquidity, and will settle
them simultaneously.
- Gridlock will not occur in this example, because payment
instructions will be settled simultaneously.
Chart 7
Safety and Efficiency Achieved under the New BOJ-NET RTGS System
Curve AB shows the possible
Value-weighted
combinations of total required
average time of
balances and average settlement
Combination achieved on
settlement
times under the new BOJ-NET
May 12, 2008 under the
RTGS system
current BOJ-NET RTGS
12:30
A
system
Low
12:00
11:30
Safety
11:00
Combination achieved in the
B
High
running test for the new
BOJ-NET RTGS system
10:30
5 10 15 20
Value of total balances required to settle
Efficiency
High Low payments on a given day (tril. yen)
Note: Under the new BOJ-NET RTGS system, payments that are currently cleared in the Foreign Exchange
Yen Clearing System and settled at 14:30 on a net basis in the current BOJ-NET RTGS system will be
settled on a gross basis.
2. Maintenance of financial system stability
Technological innovation has also posed a great challenge to central banks' efforts to
maintain financial system stability. Advances in information processing have facilitated
financial innovation and created new financial instruments such as derivatives and
securitized products. These have enabled financial institutions to unbundle and reallocate
risks of various kinds, such as credit and interest rate risks, based on diverse and complex
methods for analyzing and managing risks.
Let us take securitization of mortgages, the root of the U.S. subprime mortgage problem, as
an example. Mortgages involve various risks. For instance, a lender or an investor may face
credit risk, the risk of loss resulting from the counterparty's failure to perform its financial
obligations, as well as interest rate risk, the risk of loss from a rise in interest rates during the
loan term. Needless to say, regular bank loans entail similar risks; however, mortgages
present larger risks due to their extremely long maturity, and the risk management of
mortgages is more difficult. Securitization is an example of the enhancement of risk
management techniques achieved through advances in information processing.
When mortgages are securitized, a number of mortgages are packaged together and
securities backed by these mortgages (mortgage-backed securities, [MBSs]) are issued
(Chart 8). Because interest payments on, and redemptions of, the securities are covered by
the payments of interest and principal on a large number of mortgages, there is a greater
diversification of risk when compared with individual mortgages. For example, creating MBSs
by packaging a number of mortgages whose borrowers are scattered over a wide
geographical area can diversify risks, such as the catastrophe risk associated with a
particular area, and risk quantification becomes easier because of the law of large numbers.
Securitization also allows financial institutions to restructure the packaged mortgages into
multiple securitized products with different risk profiles that meet specific investor needs with
various degrees of risk acceptance and preference and to sell these products. What is more,
as the financial intermediary function of the mortgage market becomes more efficient through
these schemes, there are greater opportunities for borrowers to obtain mortgages on
favorable terms.
Chart 8
Securitization of Mortgages
Investor V
Securitized
Mortgage 1
Product A
Mortgage 2
Investor W
Securitized
Issuer
Mortgage 3
Product B
Investor X
Mortgage 4
Securitized
Mortgage 5
Product C
Investor Y
..
.
Securitized
Investor Z
Product D
Securitized products are created by
A large number of mortgages are
unbundling and reallocating cash flows
packaged to diversify risks.
and risks.
On the other hand, if we fail to properly understand new financial engineering techniques,
this will lead to a failure in risk management. For example, even when a securitized product
is backed by a large number of mortgages for the purpose of risk diversification, the law of
large numbers will not work if the economy as a whole is experiencing a housing bubble and
the individual loans backing such securities as a result take on similar risk profiles. Global
financial markets have been in turmoil stemming from the U.S. subprime mortgage problem
since summer 2007, and one of the causes was the excessive risk-taking arising from the
false assessment of such risks amid the rapid expansion of the market for securitized
products. I hasten to add, however, that just blaming securitization will not solve the problem.
Providing financial services is difficult, and this can be understood if you put yourself in the
position of mortgage loan suppliers. For an economy to prosper, someone has to provide
credit while managing the risks involved, namely, the credit, interest rate, and liquidity risks.
Just like manufacturing, the provision of financial services requires specialized skills, and
financial institutions need to adapt their services to changes in the financial environment.
At the same time, central banks and supervisory authorities around the world face new
challenges in their quest to maintain the financial system stability as a result of such changes
in the financial environment. While such challenges span various areas, a key prerequisite is
a proper understanding of the risks involved in individual financial transactions. In this regard,
the Bank has been conducting surveys and research on ways to properly assess and
analyze the risks involved in new financial engineering techniques and financial instruments,
and has made use of the findings in its market monitoring and discussions with financial
institutions in on-site examinations. At the same time, it is important to identify risks in the
financial system as a whole in a cross-sectoral manner. These are indeed very extensive and
difficult issues, and central banks and supervisory authorities around the world have been
deliberating on how to improve financial regulation and supervision by making use of the
lessons learned from the U.S. subprime mortgage problem.
3. Issues regarding the conduct of monetary policy
I will now move on to the last topic in the area of central banking operations, the conduct of
monetary policy, which covers a wide range of issues. Today, I will focus on two of them:
first, how the Bank makes use of the fruits of technological innovation in the development of
monetary policy tools; and second, what challenges technological innovation poses
concerning the Bank's assessment of the economic and price situation.
a. Advancement of monetary policy tools
Let me begin with changes in the ways in which the Bank supplies funds to financial
institutions by extending loans and executing money market operations. Currently, the whole
process of the Bank's funds-supplying operations, involving notification by the Bank of such
operations, financial institutions' application for such operations, the transfer of funds to
financial institutions' current accounts at the Bank, and their repayment of funds to the Bank,
are executed electronically. Swift processing of transactions and settlements is essential as
prices in financial markets change by the second in response to various news, and the
Bank's processing system is now an indispensable infrastructure for conducting money
market operations flexibly so as to maintain stability in financial markets.
Financial institutions put up collateral when they receive loans from the Bank, and the
management of such collateral has been carried out under an integrated online system
called the "pooled collateral" system since 2001. The system made possible a more efficient
use of collateral by financial institutions and improved significantly the administration of
collateral by the Bank and financial institutions. The Bank started to accept, in addition to
conventional financial assets such as JGBs and corporate bonds, new, innovative financial
assets, such as securitized products and dematerialized commercial paper, as collateral from
financial institutions. These changes are technological innovations in monetary policy tools,
achieved through the progress in information processing and financial engineering.
b. Challenges with respect to the assessment of the economic and price situation
Next, I will discuss the last issue, the challenges technological innovation poses regarding
the assessment of the economic and price situation, which forms th