choice of the appropriate model applies. this question remains yet to be explored in full depth. we know that increasing attention is being 2 / 3 bis central bankers'speeches paid to the distributional effects of economic and other public policies. i would like to reiterate that, under such circumstances, monetary policy is not a tool that is well suited for dealing with inequality or polarization and that central banks should remain focused on the aggregate implications of their own policy decisions. at the same time, however, this does not mean that central banks are allowed to ignore the distributional effects of monetary policy, especially if the distributional effects have an aggregate impact. with this aim, central banks should be, and in fact are, open to learning about heterogeneous agent macroeconomics. these days, much progress has been made on this front in computational economics. central banks are keenly following the technical progress and will keep abreast with the pioneers on this front as well. iii. the way ahead we are now about to start the 23rd boj - imes conference, which has a history of more than a quarter - century. this year ’ s conference is organized so that discussions can revolve around the three major topics that i mentioned in these opening remarks. nearly ten years ago, professor maurice obstfeld, currently chief economist of the imf and then - honorary adviser to imes, in this room identified the boj - imes conference as “ a venue in which abstract monetary theory and practical policy questions can comfortably be discussed in full depth and side by side. ” i regard his remark as a great compliment to this conference. i am convinced that this year ’ s conference will produce further insights into more effective central bank policymaking, in a same manner as previous conferences. thank you. 1 bank of japan, “ comprehensive assessment : developments in economic activity and prices as well as policy effects since the introduction of quantitative and qualitative monetary easing ( qqe ), ” 2016. nishino, kousuke, hiroki yamamoto, jun kitahara, and takashi nagahata, “ supplementary paper series for the ‘ comprehensive assessment ’ ( 1 ) : developments in inflation expectations over the three years since the introduction of quantitative and qualitative monetary easing ( qqe ), ” bank of japan review, no. 2016 - e - 13, 2016. 2 fuhrer, jeffrey, “ the role of expectations in inflation dynamics, " international

result of this is that australia has had higher long - term bond yields than elsewhere, even though the setting of the short - term policy rate is similar across countries. these higher bond yields have added to the attractiveness of australian dollar assets and this has put some upward pressure on the exchange rate. there has also been an accumulation of evidence that central bank balance sheet expansion has a stimulatory effect beyond that resulting from lower bond yields. when the central bank buys assets, investors in the private sector adjust their portfolios, buying different assets with the proceeds of their bond sales. this portfolio rebalancing can affect the price of other assets and international capital flows, as well as the exchange rate. given these considerations, the board judged it was now appropriate to combine the three - year yield target with qe further out along the yield curve. is the rba now out of firepower? the short answer here again is no. the reserve bank is not out of firepower. we have additional monetary policy options and we are prepared to use them if the circumstances require. in terms of interest rates, i think we have gone as far as it makes sense to do so in the current environment. there has been no change to the board ’ s view that there is little to be gained from lowering the policy rate into negative territory. while a negative rate might lead to a helpful depreciation of the australian dollar, it could impair the supply of credit to the economy and lead some people to save more, rather than spend more. given this assessment, the board continues to view a negative policy rate in australia as extraordinarily unlikely. but monetary policy is now about more than just short - term interest rates – we have returned to a world in which quantities matter too. in this world, it is certainly possible for us to increase the size of our bond purchases. given this, we will continue to closely monitor the economic situation and the impact of our purchases on market functioning. if we need to do more, we can and we will. the rba also has a range of tools to support the proper functioning of markets and address market dysfunction were that to occur. these tools include further liquidity provision, asset purchases and transactions in the foreign exchange market. so it would be incorrect to conclude that we are out of firepower. that brings me to the end of the four questions i posed. i am now happy to answer any other questions that you might have. thank you.