big rock theory " have realized that their warnings will not convince the public. " exit " here refers to the bank's termination of monetary easing followed by an increase in interest rates and a reduction of the monetary base because achieving 2 percent inflation is in sight as a result of monetary easing. actually, if you think about it, the " big rock theory, " which focuses on dangers related to the exit, assumes that, as a result of monetary easing, a situation arises in which prices increase and monetary policy must be tightened. therefore, the proponents of the theory do not hold the view that nothing will happen no matter how much monetary easing is pursued ; rather, they recognize the effectiveness of qqe. from see harada yutaka, kataoka goushi, and yoshimatsu takashi, eds., abenomikusu wa shinkasuru : kin'yu ganseki riron wo tou [ abenomics strides ahead : questioning the financial big rock theory ] ( tokyo : chuokeizai - sha, inc., 2017 ). my perspective, this is a welcome argument, since it recognizes the effectiveness of monetary easing. at the exit, the bank will have to raise interest rates. there are two possible ways to do so : by abandoning the negative interest rate policy currently carried out by the bank and raising the interest rate applied to excess reserves ; or by selling japanese government bonds ( jgbs ) held by the bank. while the bank at the moment has not decided anything with regard to the exit, what i would like to explain is easier to understand by focusing on an increase in the interest rate applied to excess reserves, so let me do so here. according to proponents of the " big rock theory, " the bank will make large losses when it raises the interest rate on excess reserves because of the low interest rates on jgbs purchased by the bank in the past. it is of course possible that the bank may register losses because it will receive low interest rates while paying high interest rates. proponents of the " big rock theory " argue that if the bank does indeed make losses, confidence in the currency would be undermined, there would be hyperinflation, the yen would collapse, and interest rates would surge. however, please think about it carefully. essentially, does anyone use money paying attention to whether the central bank makes a profit or a loss? moreover, the central bank, in return for purchasing government bonds in the market,

amando m tetangco, jr : working together towards a stronger economy speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the security bank economic forum “ economic & business forecast 2015 ”, makati city, 30 january 2015. * * * the presentation this afternoon will start with a discussion on the global economic and financial developments and their possible implications for the philippine economy. then we will look at the growth experience of the philippine economy and the underlying factors that form the bases for the economy ’ s resilience. a look back to 2014 i was looking at the new logo of security bank. it shows two halves – just like the yin and the yang. two parts working and coming together. it ’ s an interesting depiction although of course, on the “ hard - court ” ( as in the basketball, or even in volleyball courts ), it would be a stretch to say that the greens would be above the blues for long periods. i must have a conversation with abet about his choice of corporate colors. the old security bank color was already the perfect one – blue! but seriously, two things coming together and being integral parts of each other. these are very similar to the themes that pervaded our global operating environment in 2014. in 2014, there were two themes that dominated the global operating environment – 1 ) uneven global growth and 2 ) divergent monetary policies in advanced economies. as the us economic growth continued to gain traction and the us fed subsequently ended its asset purchase program in october last year, markets began to interpret the fed ’ s statements to mean that it would begin “ lift off ” ( or raise the fed funds target rate ) sometime this year. in contrast, eu and japan remained barely able to eke out growth. by the ecb ’ s and the boj ’ s own pronouncements, they were willing to further expand easy monetary conditions to stimulate growth in their jurisdictions. ecb president mario draghi even pledged to do “ whatever it takes ”. so, in one part of the globe, you had the fed poised to tighten monetary conditions, and in another, you had the ecb and boj committing to provide more liquidity as needed. this combination ushered the shift in market sentiment – capital flowed out of eme assets ( the long - standing darling of investors ) toward us financial assets. this resulted in a