the parties are enjoined from manipulating their exchange rates to gain an unfair trade advantage. this is not a controversial issue for us. we have long relied on our marketdetermined flexible exchange rate to absorb external shocks and cushion the economy from their impact. this policy has served canada well. without a freely floating currency, prices, wages and unemployment would fluctuate markedly, creating havoc for people and businesses. a flexible exchange rate is essential for us to be able to pursue an independent monetary policy. we maintain a high standard of transparency, both with regard to our framework for managing foreign exchange reserves and the publication of relevant data. this speech is another step in making sure that our framework is well understood. i would like to thank wendy chan, eric chouinard, mervin merkowsky and maksym padalko for their help in preparing this speech. 1 some prominent international literature on reserve adequacy focuses on emerging - market economies that are subject to sudden stops in capital flows. see, for instance, o. jeanne and r. ranciere, “ the optimal level of reserves for emerging market countries : a new formula and some applications, ” the economic journal 121, no. 555 ( 2011 ) : 905 – 930. 2 the role of international reserves in mitigating rollover risk has been an important focus of the literature. see, for instance, j. bianchi, j. c. hatchondo and l. martinez, “ international reserves and rollover risk, ” american economic review 108, no. 9 ( 2018 ) : 2629 – 2670. 3 as of january 2019, the currency composition of our reserves was 67 per cent usd, 19 per cent eur, 10 per cent gbp and 3 per cent yen. see official international reserves, department of finance canada. 6 / 6 bis central bankers'speeches

new businesses that endeavor to supply goods and services in areas of potentially high demand. those areas include medical treatment and welfare, environment, and energy. under these circumstances, financial institutions are expected to provide innovative, demand - responsive financial services. such efforts are likely to bolster the competitive advantages of japanese financial institutions, since the skills and experiences gained from such activities in japan may lead to greater business opportunities in other asian economies. it should be noted that some of these asian economies are also expected to face growing aging populations in the near future. that brings me to the end of my presentation. thank you very much indeed for your kind attention. bis central bankers ’ speeches chart 1 recent developments in japan ’ s economy ( 2 ) value of public works contracted ( 1 ) real exports s. a., tril. yen s. a., cy 2005 = 100 cy 07 cy 07 ( 3 ) private consumption ( 4 ) industrial production s. a., cy 2005 = 100 s. a., cy 2005 = 100 synthetic consumption index ( real ) projection cy 07 cy 07 sources : cabinet office ; ministry of economy, trade and industry ; east japan construction survey ; bank of japan. bis central bankers ’ speeches chart 2 the bank of japan ’ s economic and price forecasts ( 1 ) real gdp y / y % chg. foreca sts ma de in apr. foreca sts ma de in ja n. 2. 3 2. 0 1. 7 1. 6 - 0. 2 - 1 - 0. 4 - 2 - 3 - 4 fy 02 ( 2 ) cpi ( all items less fresh food ) y / y % chg. 1. 5 forecasts made in apr. 2012 forecasts made in jan. 2012 1. 0 0. 7 0. 5 0. 3 0. 5 0. 1 0. 0 0. 0 - 0. 1 the highest figure of all the policy board members ’ forecasts - 0. 5 the highest figure of the majority of the policy board members ’ forecasts - 1. 0 the median of the policy board members ’ forecasts the lowest figure of the majority of the policy board members ’ forecasts - 1. 5 the lowest figure of all the policy board members ’ forecasts - 2. 0 fy 02 note : the figures for real gdp for fiscal 2011, 2012, 2013, and the cpi ( all items less fresh food ) for fiscal 2012 and 2013 are the policy board members ’ estimates. source : bank