a distance, it might be informative to take stock of some monetary policy implications from our decade - long struggle. first, in connection with the leitmotif of today's conference, we should not restrict central banks'stabilization policy to a narrow domain of macroeconomic management. there could be circumstances where a central bank needs to play a critical role in safeguarding the stability of the financial system. in addition, the effectiveness of monetary policy hinges crucially on the proper functioning of financial markets and the financial system. this is because monetary policy is implemented through central banks'lending, deposit - taking, money - market operations, and other activities in financial markets. if financial stability is at risk, central banks'policy would be severely constrained. throughout the 1990s, the boj conducted its policy while paying close attention to the condition of the financial markets and the financial system. this was especially true in the late 1990s when the systemic dysfunction of our banking system was apparent. second, central banks need to tackle two elusive but inter - related questions : how do asset price fluctuations affect economic stability ; and how should a central bank respond to big swings in asset prices? a de - coupling of asset prices and general prices is not necessarily rare. besides japan's anomalous experience in the bubble period, recent examples of this sort have been seen in the united states, britain, and australia. in many advanced economies, asset prices tend to rise in sync with a cyclical economic upturn, while general price indices are becoming less responsive due to productivity growth and firms'cost retrenchment amid global competition. however, japan's painful experience tells us that central banks should keep a close watch on asset prices, for they could have a material impact on the economy and inflation in the medium to long run. central banks should also be alert to the excessive growth in money and credit which often accompanies asset bubbles. i presume such vigilance should somehow be blended into our conventional wisdom that central banks contribute to economic stabilization by ensuring price stability. 4. concluding remarks now, let me conclude. as i said earlier, the most pressing task for the bank of japan at this moment is to achieve sustainable growth on the basis of price stability. towards that goal, the boj is firmly committed to maintaining the current easing policy. i am impressed at how korea has pushed forward structural reform in a wide range of areas following the economic crisis in 1997. i am sure the bank of korea has made

. even if we seem to have found a single effective indicator, given that it cannot provide a complete picture of continuously changing economic and financial conditions, we must continue to review carefully a wide range of indicators. it is a demanding task, but we must undertake this challenge. third, the importance of a healthy amount of discretionary powers. the public sector needs appropriate discretionary powers, both in the area of monetary policy and financial supervision. in spelling out the conditions for exercising the “ lender of last resort ” function of the central bank, gerald corrigan used the words “ constructive ambiguity ” 9 when he was president of the federal reserve bank of new york. in recent years, the pendulum had swung substantially toward transparency. however, at the end of the day, the role of central banks, regulators and supervisors is to prevent instability of the economy and financial markets, which could materialize if simply left to the free - market competition. if actions of policy makers were based on mechanical rules which could be fully incorporated into the behavior of market participants, this may rather end up being a source of instability for the market and economy. i believe it is time to bring the pendulum back, at least to some extent, toward allowing more room for discretionary measures. concluding remarks the points i have raised today mean going back to the basics of central banking. but, this does not mean returning to central banks of the past. the raison d ’ etre of the central bank to achieve stable financial environment which would enable the achievement of sustainable growth remains unchanged. however, both the economy and financial markets are evolving continuously. after the end of world war ii, until relatively recently, a stable financial environment was almost synonymous with price stability. also, we were quite used to a financial system structure where the health of commercial banks was almost synonymous with financial system stability. however, having experienced the current crisis, we have come to realize that such understandings are now outdated. when central banks are celebrating success, new problems may be beginning to emerge in the private sector quietly. by the same token, when central banks are facing difficult challenges, the green shoots to resolve the problem may already be beginning to grow in the private sector. risks always materialize but in new appearance. in this regard, central banks need to continuously be in a learning mode. as with private - sector economic entities, complacency is the most dangerous risk for central banks. we need to be humble as numerous challenges await the global economy.