, thereby providing a boost to economic globalization. in other words, regional trade arrangements are not aimed at creating an exclusionary economic bloc. to the contrary, such trade networks can make the asian economies more open and prosperous. on the financial front, cooperation among asian countries is gathering pace. its prime motivation is to avert a financial crisis like the one we went through in 1997 - 98. efforts in this field are producing tangible results around two pillars : 1 ) the establishment of bilateral swap arrangements, and 2 ) the development of regional bond markets. as some of you might know, there is a collegial group of central banks in this region. this group, called emeap, an acronym for the executive meeting of east asia pacific central banks, has eleven members. from its inception in 1991, emeap comprises nine east - asian central banks plus two central banks from australia and new zealand. emeap is very active in three key areas, namely, financial markets, banking supervision, and settlement / payment systems. to give you a picture of what emeap is doing for bond market development, allow me to digress a little bit. emeap has engaged itself in the project known as abf, or asian bond fund. in this fund, eleven emeap central banks jointly set up their foreign reserves to place investment funds composed of asian sovereign bonds. the purpose of abf is to stimulate turnovers in the bond market in this region. in june 2003, the central banks launched abf1, the first stage of the abf project, to invest in dollardenominated sovereign bonds issued by asian countries. in may 2005, emeap went a step further by announcing the start of abf2. abf2 invests in sovereign bonds issued in asian local currencies. although led by the emeap central banks, abf is not an " asia - only " project. actually, western financial services companies take part in this project as a fund manager and custodian. from what i have said, you can sense the pragmatic spirit of asian regional cooperation. in fact, pragmatism is the hallmark of joint initiatives in this region. another point is that these cooperative endeavors are largely market - driven. put differently, asian cooperation is an " autonomous " process. it is in sharp contrast to the eu integration where member nations have agreed to transfer some of their sovereignty to brussels, frankfurt, and other european cities to operate

a currency called the “ yen. ” in order for this mechanism to function properly, ( 1 ) the value of money - - in other words, domestic prices - - must be stable ; ( 2 ) the mechanism for settling transactions by means of money must be efficient and convenient ; and ( 3 ) private financial institutions, as the members of the financial system, as well as the central bank must be sound and reliable. the maintenance of these three conditions - - that is, price stability, stable operations of the payment and settlement systems, and the resulting soundness of the financial system - - is the important responsibility of the central bank, an institution which has a primary role in the issuance and circulation of the “ yen. ” the central bank system is thus an important component of the financial system infrastructure of japan. therefore, in order to win domestic and overseas confidence in the japanese financial markets and to maintain and improve the international competitiveness of these markets, it is essential that the central bank system is able to win domestic and overseas confidence, and that the market environment is improved through such efforts as the “ big bang ” reform package. third, many of the issues raised regarding the revision of the bank of japan law can also be applied to economic structural reform and to administrative reform in japan. - 11 - the bank of japan has urged that ( 1 ) its organizational objectives and roles be clarified ; and ( 2 ) the management of policy and operations be founded on a mechanism which allows the market participants and other third parties to monitor ex post facto whether the bank is discharging its responsibility appropriately, rather than be part of a mechanism that attaches importance to advance coordination with the government. this argument applies not only to the central bank. in fact, it may be applied generally to the question of what the economic and financial systems should be or what the role of government administration should take to meet the challenges of a new era. the japanese economy today is required to function within a mechanism under which any institution is responsible for its own course of action and then the market and the public examine and evaluate the actions taken, instead of within a system governed by advance examination based on administrative supervision and regulations. such reforms will fundamentally change the economic and social structures of japan, making them more consistent with global standards. the old methodology of carrying out reforms within the conventional framework and ways of thinking must be changed. it is necessary to consider how the distinctive systems and ways of thinking in japan could be changed from a perspective of