##udential policy. the quantitative and qualitative monetary easing is a policy that encourages financial institutions and investors to take on risks and affects asset prices by influencing the yield curve and risk premia. on the other hand, prudential policy is a policy under which the bank encourages financial institutions to strengthen and enhance their risk management and closely monitors any signs of financial imbalances in, for example, asset prices. based on these, some people may question whether the quantitative and qualitative monetary easing bis central bankers ’ speeches and prudential policy conflict with each other or whether the bank ’ s thinking on the conduct of prudential policy will change under the quantitative and qualitative monetary easing. however, i would like to emphasize that the quantitative and qualitative monetary easing and prudential policy do not conflict with each other and are consistent, and that the bank ’ s thinking on the conduct of prudential policy remains unchanged. this thinking can be summarized into two points. first, although the bank expects financial institutions to actively take on risks under the quantitative and qualitative monetary easing, its basic stance remains unchanged, in that it will urge financial institutions to appropriately manage the amount of risks they bear relative to their financial strength. excessive risk - taking may not immediately cause problems but will eventually lead to instability in financial institutions ’ business conditions and the financial system, and will not promote improvement in economic conditions in the long term. on the contrary, expansion of risk - taking is a favorable action to increase profits as long as risks are managed properly. as i mentioned, the bank has been working to exchange views with and advise financial institutions through on - site examinations, off - site monitoring, and seminars about risk management and ways to enhance the institutions ’ capabilities for financial intermediation and business reconstruction. and second, the bank ’ s basic thinking about the overheating of asset prices and financial imbalances also remains the same. it is difficult to discern financial imbalances, but if the bank judges that financial imbalances exist, it is necessary to take appropriate action. on the other hand, if a rise in asset prices is a reflection of the policy effects or improved outlook for the real economy, it will have positive effects on the real economy by means of the wealth effect. as far as is shown by a range of indicators and financial institutions ’ behavior, there is no sign at this point of excessively bullish expectations in asset markets or in the activities of

3. 1 ( 0. 0 ) 1. 6 ( - 0. 2 ) 1. 6 ( - 0. 6 ) 1. 7 ( 0. 1 ) 0. 5 ( 0. 2 ) 4. 2 ( 0. 1 ) 6. 6 ( 0. 0 ) 4. 8 ( 0. 0 ) 3. 4 ( 0. 0 ) 1. 8 ( 0. 0 ) 2. 2 ( - 0. 3 ) 1. 5 ( 0. 1 ) 0. 6 ( 0. 5 ) 4. 6 ( 0. 0 ) 6. 2 ( 0. 0 ) 5. 1 ( 0. 0 ) y / y % chg. + 3. 4 + 3. 1 imf projection ( oct. 2016 ) - 1 cy 90 92 94 96 98 00 02 04 06 08 10 12 14 16 17 notes : 1. asean5 are indonesia, malaysia, the philippines, thailand, and vietnam. notes : 2. figures in parentheses are the differences from the july 2016 weo projections. source : imf. chart 3 world trade volume level of world trade volume growth of world trade volume y / y % chg. 2003 - 2006 average cy 2005 = 100 - 5 - 10 - 15 - 20 cy 95 world trade volume world real gdp cy 95 trend implied by real gdp world trade volume notes : 1. the world trade volume is calculated by adding up real imports in each country. notes : 2. the trend of world trade volume is estimated based on the regression of the world trade volume on the world real gdp for the period before 2007. sources : cpb netherlands bureau for economic policy analysis ; imf ; national statistics offices ; haver ; thomson reuters datastream ; ceic. breakdown of world trade volume ( real imports ） by region and item changes in real imports by item real imports of advanced economies cy 2000 - 2007 average = 100 trend implied by real gdp primary materials consumer goods ( nondurable ) real imports intermediate goods ( transport parts and accessories ) capital and consumer goods ( transport equipment ) fuels cy01 chart 4 consumer goods ( durable ) real imports of emerging economies cy 2000 - 2007 average = 100 trend implied by real gdp real imports cy01 decelerating intermediate goods ( processed materials ) intermediate goods ( chemical processed materials ) intermediate goods ( parts and accessories ) capital goods ( excluding transport equipment ) 0. 0 - 0. 5 - 1. 0 - 1. 5 - 2. 0 - 2. 5 % points note