haruhiko kuroda : monetary policy – its effects and implementation opening remarks by mr haruhiko kuroda, governor of the bank of japan, at the 2015 bojimes conference, hosted by the institute for monetary and economic studies, bank of japan, tokyo, 4 june 2015. * i. * * introduction good morning, ladies and gentlemen. it is my great honor to say a few words at the beginning of the 22nd boj - imes conference. on behalf of my colleagues at the bank of japan and myself, i would like to express my sincere welcome to all of you. at last year ’ s conference titled “ monetary policy in a post - financial crisis era, ” we had active discussions on fundamental issues of monetary policy during the period of slow economic growth following the global financial crisis. since then, there has been further progress in research on the effects of unconventional monetary policy in academic and central bank circles. besides, growing attention has been paid to renewed debate over the slow recovery after the financial crisis, as represented by the thesis of secular stagnation. against the backdrop of these factors, we have selected “ monetary policy : its effects and implementation ” as the theme of this year ’ s conference. the aim is not only to keep monetary policy at the center of the discussion, but also to put greater emphasis on implications for policy conduct in practice. i hope that, in light of the progress in monetary policy research and the recent developments in the global economy, we will have frank and lively discussions on the monetary policy challenges that we central bankers currently face. to kick things off, i would like to raise some issues relevant to these challenges. ii. global economic conditions and current issues concerning the conduct of monetary policy over the past year, the global economy as a whole has been recovering moderately. however, we have observed considerable differences in developments of economic activity and prices among countries and regions. in reflection of these differences, diverging directions of monetary policy among the united states, europe, and japan have become increasingly apparent. this certainly was a major feature of monetary policy in the global context for the past year. meanwhile, headline inflation rates dropped globally, due primarily to a plunge in crude oil prices. with these significant developments in mind, i would like to raise three current issues concerning the conduct of monetary policy. the first issue concerns the effects of unconventional monetary policy and its transmission channels. in terms of monetary policy implementation, the european central bank launched the expanded asset purchase programme

in january, and many of the major central banks have now adopted quantitative easing ( qe ). on the research front, academic and central bank circles have accumulated studies on unconventional policy that have been conducted vigorously to date. these studies have demonstrated that unconventional measures, such as qe and forward guidance, have been generating monetary easing effects, primarily through influencing long - term interest rates and asset prices, as well as inflation expectations. i believe that it will be meaningful if we can further promote a common understanding on unconventional policy by sharing the various insights obtained from both implementation and academic research of monetary policy. the second issue pertains to inflation expectations and the decline in crude oil prices. the plunge in crude oil prices since 2014 has posed a new challenge for the conduct of monetary policy. in october 2014, the bank of japan decided to expand quantitative and qualitative monetary easing ( qqe ). this policy decision aimed at maintaining the improving momentum of expectation formation and at pre - empting manifestation of a risk that the decline in the bis central bankers ’ speeches inflation rate, even though caused by the oil price decline, could delay conversion of the deflationary mindset, which had been progressing steadily under qqe. the background to the policy decision is that, unlike the united states and other countries where medium - to long - term inflation expectations have been well anchored, japan is in the midst of drastically changing the deflationary mindset ; namely, re - anchoring inflation expectations to the price stability target of 2 percent. inflation expectations are obviously one of the most important variables for the conduct of monetary policy. therefore, it is a major policy concern for central bankers to gain a better understanding of how to measure inflation expectations, how such expectations actually affect firms ’ price - and wage - setting behavior, as well as households ’ consumption decisions, and how to evaluate the degree to which inflation expectations are anchored. i hope that further progress will be made in research in this field. the third issue is how to deal with the international spillovers induced by the diverging directions of monetary policy among advanced economies. in emerging economies, monetary authorities have paid more attention to developments in foreign exchange rates and international capital flows that are influenced by major central banks ’ policy actions and announcements of their future directions of policies. in addressing these international spillovers, how to use monetary policy, macro - prudential policy, and capital flow management policy in combination has come to be a crucial issue, particularly for countries