not permeate adequately, and market interest rates may fluctuate independently of the intentions of the central bank, affected by unnecessary conjecture and rumors. the second distinct feature of monetary policy is that considerable time is required before its effects materialize, in other words, there is a long time lag before policy effects permeate throughout the economy. the mechanism through which changes in interest rates are transmitted to economic activity is complicated. interest rate changes may have a relatively rapid influence on firms planning to make an investment in the near future. theoretically, the effect of interest rate changes should be swiftly transmitted to fluctuations in asset prices. on the other hand, it takes a considerable time for the effects of interest rate changes to appear in actual corporate profits and household income levels. one reason is that there are various types of borrowing and investment with short and long maturities. as new interest rates are applied to these instruments only at the time of maturity, considerable time is required before the overall interest rate level changes and before the new level takes effect throughout the economy. in addition, changes in corporate profits and income levels will only bring about a gradual change in the confidence of firms and households in their investment and consumption, and after some delay in time, new decisions will be made on investment and consumption. further time is then needed before these decisions materialize as actual spending. it has been said that pre - emptive policy responses are necessary to ensure price stability. this is because, as mentioned earlier, price stability must be achieved in the medium to long term, and because there will always be a considerable time lag before policy effects permeate throughout the economy. as this time lag in permeation of policy effects has become more widely recognized, greater emphasis has come to be placed in the management of monetary policy on assessing the potential risks in the economy, to enable pre - emptive policy responses. e. considerations in monetary policy management the requirements for monetary policy are thus “ maintenance of market confidence ” and “ pre - emptive response ”. it is, however, extremely difficult to achieve these two requirements simultaneously. let me explain how the two requirements conflict. in order to make timely policy responses, it will be necessary for the central bank to act based on its projections of the economic and price situations one or two years ahead. however, considering the difficulty of accurately predicting economic developments, such action may not necessarily result in market confidence in the bank ’ s policy. nevertheless, it would be impossible to act

haruhiko kuroda : innovations in payments and fintech – the central bank ’ s perspective remarks by mr haruhiko kuroda, governor of the bank of japan, at the forum on payment and settlement systems, tokyo, 17 march 2016. * * * introduction it is a great pleasure to welcome you all today to our forum on payment and settlement systems. i. innovations in payments and fintech recent years have seen a number of developments in financial services, including in the area of payments. innovations that combine finance and new technology, called “ fintech, ” have become a particular focus of attention. it is clear that there are both supply - side and demand - side factors behind such developments. on the supply side, the advance in technological innovations related to information and communications is progressing. the processing power of computers continues to grow rapidly, and computers can analyze huge amounts of data – that is, “ big data ” – in a relatively short period of time. there has also been a rapid spread of forms of infrastructure such as the internet and mobile terminals, which are easily accessible to a wide range of people. in other countries – particularly in emerging or developing nations where existing financial services provided by banks have not penetrated sufficiently – new services such as mobile payments are generating large expectations in terms of “ financial inclusion ” – or the promotion of access to financial services. on the demand side, globalization of the economy continues to progress, and more and more transactions are being made across borders as well as time zones. new forms of economic activities have arisen both here and abroad – such as “ e - commerce ” and the “ sharing economy ” – while lifestyles have diversified. reflecting such developments, the needs for financial services are growing increasingly diverse and complex. for example, there is an emerging need for payment methods that are compatible with internet shopping on weekends or at midnight as well as low - value cross - border remittances. there is also a growing need to use forms of information associated with payments by utilizing loyalty cards. as i just pointed out, we can judge that there are factors on both the supply and demand sides which are affecting developments in fintech. if we consider that the financial business has strong characteristics as an “ information industry, ” then it is not surprising that developments in information technology have a large influence, especially in finance. for example, credit, investment, and risk management are based on the accumulation of a great deal of information and analysis in which new technology has