haruhiko kuroda : the virtues of international cooperation among central banks remarks by mr haruhiko kuroda, governor of the bank of japan, at a reception to celebrate the 30th anniversary of the bundesbank ’ s representative office, tokyo, 22 may 2017. * * * good evening, ladies and gentlemen. it is a great honor to be invited to this reception celebrating the 30th anniversary of the deutsche bundesbank in tokyo. i would like to extend my sincere congratulations to dr. dombret, executive board member of the bundesbank, ms. moede, representative of the tokyo office, and other staff members of the bundesbank. throughout these 30 years, the bundesbank has positioned its tokyo office as the hub for its activities in asia, and has shown its strong commitment to japan. i would like to highlight in particular, the expansion of the functions of the tokyo office with the establishment of a trading office in 2012, just one year after the tragic great east japan earthquake. looking around at all the faces gathered here to celebrate this anniversary event, i must commend the bundesbank tokyo office on their great success in establishing a deep and extensive network in the local community. over the past 30 years, there have been significant advancements in the global economy. the growth rate of trade volume, which until the 1980s followed a similar rate to real gdp, significantly outpaced real gdp from the 1990s to the mid - 2000s. one of the contributing factors was the expansion of global value chains from the late 1980s with the end of the cold war, when large amounts of direct investment began to flow into countries of the eastern bloc, such as china, the member states of the former soviet union, and eastern europe, as they entered into the global economy. both germany and japan played pivotal roles in this new wave of globalization. the advancement of globalization over the years has brought about stronger relationships among countries and regions, both economically and financially. on the other side of the picture, as evident in the case of the asian currency crisis 20 years ago or the global financial crisis that erupted 10 years ago, negative shocks are more likely to transcend national borders. in this situation, international cooperation among central banks has become ever more important. in terms of the relationship between germany and japan, the bank of japan established a representative office in frankfurt in 1956. making the most of the representative offices in each other ’ s countries, the deutsche bundesbank and the

is in fact the starting point for the subsequent questions. the second question is why deflation has continued for a prolonged period. discussions on the severe economic conditions then lead to the third question : are japan ’ s public finances sustainable? in this context, i am often asked why, despite the deterioration in the fiscal balance, yields on japanese government bonds ( jgbs ) have been stable at low levels. finally, a fourth question i am often asked is whether japan ’ s economy can really regain its vitality. it is an undeniable fact that japan ’ s economy faces many challenges. however, i believe that japan ’ s economy can most definitely regain its vitality. needless to say, we have to work hard to achieve this. obviously, the right prescriptions are also essential. to this end, it is necessary to have an accurate understanding of both the strengths and the weaknesses of japan ’ s economy. i am looking forward to exchanging views with you on this point later. bis central bankers ’ speeches ii. the current state of japan ’ s economy i will start with short - term developments in economic activity in japan. japan ’ s economy contracted severely following the failure of lehman brothers, but then started to improve around spring 2009. it continued doing so until the summer of 2010, mainly due to the increase in exports and production brought about by faster growth in emerging and commodity - exporting economies as well as policy measures to promote the sale of environment - friendly durable consumer goods. the improvement seems to have paused from the fall of 2010, but recent data suggest that japan ’ s economy looks like it is about to emerge from that pause. if we compare these short - term developments in japan ’ s economy with those in other advanced countries, japan is not doing badly. 1 for example, according to the latest projections by the international monetary fund, japan ’ s economy was expected to grow by 4. 3 percent in 2010, the highest rate of growth among the g - 7 countries ( chart 1 ). moreover, the unemployment rate in japan, although higher than before the failure of lehman brothers, is at 4. 9 percent, which is far below the roughly 10 percent in the united states and the euro area ( chart 2 ). of course, the current level of economic activity is still below that before the global financial crisis and therefore not satisfactory. however, this is a problem common to many advanced economies. with regard to the degree of financial system stability, japan is the most stable