issuing " central bank money " with finality, namely, banknotes and central bank deposits. the modern currency system, which consists of a central bank and private banks, is characterized as " a two - tiered system. " in this two - tiered system, the central bank specializes in supplying banknotes and central bank deposits, while private banks perform the function of credit creation and provide deposit currencies as broader money. through such activities, private banks provide payment services to the general public and allocate financial resources to the economy as loans and credits. from the perspective of information processing, the emergence of central banks allowed people to get rid of the burden of evaluating the credibility of many payment instruments. the creation of central banks has substantially reduced the costs of information processing in payments and settlements. at the same time, private banks have contributed to efficient allocation of financial resources through their function of information processing. the modern two - tiered structure reflects the wisdom of human beings in history to achieve both efficiency and stability in the currency system. in this regard, the issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. this may have a large impact on the aforementioned two - tiered currency system and private banks'financial intermediation. under the current system, the central bank allows direct access to its accounts only to a limited number of entities such as private banks. from the viewpoint of the usage of information, the central bank leaves the private sector the opportunities to utilize detailed data such as " who buys what " attached to daily transactions. at the same time, the central bank can obtain the information necessary to maintain the stability of payment and settlement systems through operating its wholesale settlement systems. the issuance of central bank digital currencies could also affect such a role - sharing structure for utilizing information. to sum up, it innovation raises many fundamental questions and challenges related to the currency system, the design of central bank infrastructure and the utilization of information attached to economic activities. i sincerely hope our understanding of these issues will be further deepened in the future. initiatives taken by the bank of japan to tackle these new challenges, the bank of japan has recently been taking various initiatives in the fields of innovation and fintech. in 2016 the bank established its " fintech center. " the bank has also been conducting a joint research project called " project stella " with the european central bank to study the potential of distributed ledger technology

bank of japan ’ s june report of recent economic and financial developments1 bank of japan, 13 june 2002. * the bank ’ s view * * japan ’ s economy shows signs of stabilizing with a distinct increase in exports and a pick - up in production, although domestic private demand remains weak. with regard to final demand, business fixed investment continues to decrease and private consumption, despite some resilience, remains weak as a whole. moreover, housing investment remains sluggish and public investment is on a downtrend. meanwhile, net exports ( real exports minus real imports ) are increasing markedly due to the recovery in overseas economies and also to the effects of restocking abroad, mainly in it - related goods. industrial production is picking up, reflecting the increase in exports and completion of inventory adjustment. the rebound in production is beginning to affect employment conditions, albeit marginally, with an increase in overtime working hours and in new job offers mainly for part - time workers. nevertheless, firms are still maintaining their stance on reducing personnel expenses from a longer term perspective and as a consequence, household income continues to decrease noticeably. in sum, employment and income conditions of households overall remain severe. turning to the outlook, exports are projected to continue to trend up mainly in it - related goods amid the ongoing recovery in overseas economies, especially in the u. s. and east asia. however, the pace of recovery is likely to become somewhat slower in the future than at present, as the effects from overseas restocking dissipate. supported by this upturn in exports and also by the completion of inventory adjustment, industrial production is expected to accelerate momentarily followed by a gradual uptrend. meanwhile, with respect to domestic demand, public investment is projected to follow a declining trend and private demand is likely to remain weak for the immediate future. nevertheless, if the increase in exports and production mentioned above continues, corporate profits will recover, particularly in the manufacturing sector, and this will gradually have a positive impact on domestic private demand such as business fixed investment. overall, japan ’ s economy is projected to stop declining as a whole since an increase in exports and production will lead to an improvement in corporate profits and in turn, domestic private demand. however, considering that forces restraining the economy stemming from excessive employment and debt are still persistently at work, it will take a while for the positive momentum to spread across the nonmanufacturing sector, small firms and households. the outlook for overseas economies,