under financial globalization, the global financial crisis showed that liquidity crises can spill over to other jurisdictions. it is therefore important to ensure liquidity sources through collateralized transactions such as repos, also from the viewpoints of controlling moral hazard, deterring overdependence on central bank llr and maintaining global financial stability. financial institutions, including japanese banks, typically hold large amounts of government securities issued by their home countries. accordingly, it is becoming important to establish a facility by which banks can raise foreign - currency liquidity in host countries through collateralizing government securities issued by home countries. under such circumstances, central banks need to consider how and to what extent they provide their own infrastructures including high - value payment systems and securities settlement systems in order to support such collateralized transactions. for example, in terms of the “ space ” dimension, central banks will have to consider whether and to what extent they should respond further to facilitate settlements with finality also on a cross - border basis. in retail payments, increased economic activities at night and on weekends are requiring initiatives called “ 24 / 7 instant payments ” that enable real - time payments to be made 24 hours a day, 365 days a year. retail payments made at night and on weekends may cause an increase in unsettled amounts among commercial banks and other entities. there are risk - management methodologies to deal with such unsettled amounts through collateral and credit limits. as an ultimate measure to reduce such unsettled amounts, however, a central bank might be able to take decisive action in terms of time and provide settlements with finality also at night and on weekends. indeed, such action is now being considered in europe and australia. 2 / 4 bis central bankers'speeches innovation in information technology and central bank payment and settlement systems meanwhile, innovation in information technology is making the cost of handling cash more visible. in addition, while virtual currencies such as bitcoin have emerged under the trend of fintech, some people argue that central banks should consider issuing digital currencies, which could partially replace banknotes. such arguments would mean applying digital technology even to banknotes, which have always been based on paper - based technology. this could have a substantial impact on the traditional concept of banknotes. at the same time, central bank digital currency ( cbdc ) is one of the issues in considering the role of banknotes and central bank payment and settlement systems. if cbdc is directly issued to the general public, it

preliminary flash estimate. it is set to remain weak in the near term. surveys indicate that manufacturing 1 / 4 bis - central bankers'speeches continues to contract while services activity is expanding. consumer confidence is fragile, and households have not yet drawn sufficient encouragement from rising real incomes to significantly increase their spending. nevertheless, the conditions for a recovery remain in place. while the labour market has softened over recent months it continues to be robust, with the unemployment rate staying low, at 6. 3 per cent in december. a solid job market and higher incomes should strengthen consumer confidence and allow spending to rise. more affordable credit should also boost consumption and investment over time. provided trade tensions do not escalate, exports should support the recovery as global demand rises. fiscal and structural policies should make the economy more productive, competitive and resilient. we welcome the european commission's competitiveness compass, which provides a concrete roadmap for action. it is crucial to follow up, with further concrete and ambitious structural policies, on mario draghi's proposals for enhancing european competitiveness and on enrico letta's proposals for empowering the single market. governments should implement their commitments under the eu's economic governance framework fully and without delay. this will help bring down budget deficits and debt ratios on a sustained basis, while prioritising growth - enhancing reforms and investment. inflation annual inflation increased to 2. 4 per cent in december, up from 2. 2 per cent in november. as in the previous two months, the increase was expected and primarily reflected past sharp drops in energy prices falling out of the calculation. along with a month - on - month increase in december, this led energy prices slightly higher on an annual basis, after four consecutive declines. food price inflation edged down to 2. 6 per cent and goods inflation to 0. 5 per cent. services inflation edged up to 4. 0 per cent. most underlying inflation indicators have been developing in line with a sustained return of inflation to our medium - term target. domestic inflation, which closely tracks services inflation, has remained high, as wages and some services prices are still adjusting to the past inflation surge with a substantial delay. at the same time, recent signals point to continued moderation in wage pressures and to the buffering role of profits. we expect inflation to fluctuate around its current level in the near term. it should then settle sustainably at around the two per cent medium - term target. easing labour cost pressures and