free trade agreements are spreading throughout asia. in addition, asean is accelerating the process for building the asean economic community ( aec ) by 2015. it will be interesting to see how the present banking and other financial services change when a single market for goods and services is formulated in asean. i hope the governors can provide us with insights into developments of the aec. with the globalization of the world's financial markets, large capital flows will continue to have a strong impact on open economies. this holds true for most of the asian economies including the asean. it is, and will surely be, the most difficult task for any monetary authorities to maintain the stability of foreign exchange rates, the free flow of capital, and the independence of monetary policy simultaneously. the answer to this proposition probably lies in the resilience of markets. in order to increase the ability to absorb external shocks from massive capital flows, the priority seems to strengthen the function of foreign exchange and financial markets in the region as a whole. in this regard, frequent exchange of information, deep analysis and concerted efforts by the emeap central banks will contribute to addressing risks and vulnerabilities in the markets. such collaborative actions may cover the roles of the imf, which commits itself to extensive reform to meet new challenges under the leadership of rodrigo. conclusion it is often said that asia is highly diverse in culture, social framework and the stage of economic development. since the asian economies are in many respects very different from the european, we will probably follow our own process for economic integration. in that process, the better functioning of markets through regional cooperation will help provide a better business environment for industries and financial institutions, and lead to more efficient resource allocation. the more - than - ten - year history of emeap itself proves that cooperation based on mutual understanding and respect is possible in any circumstances. i am sure the guest speakers have various opinions on today's topics, and we will be able to appreciate their visions through our stimulating discussions. i would be delighted if this symposium helps you build insights into the dynamism of asian economies and central bank cooperation in the region for the decade to come. thank you.

at around 2 percent. then federal reserve chair janet l. yellen referred to this point in the speech at the commonwealth club cited above. as indicated by japan's experience of suffering from prolonged deflation, the difficulty of overcoming deflation has become well known. this is perhaps one of the factors that motivated major central banks to reach a consensus of defining price stability as an annual inflation rate of 2 percent. " is the world at risk of the'japan disease '? " the international economy, summer 2017. why exactly is deflation problematic? for households, it is problematic because it often goes hand - in - hand with a decline in their wages. there may be some who argue that, putting aside wages, deflation is actually a desirable phenomenon because it increases real income. indeed, it may be true that a transient mild deflation would cause no particularly significant problems. if it continues for a protracted period, however, households will ultimately be forced to bear the burden through economic stagnation. deflation becomes a factor weighing heavily on the economy through a number of channels. one of the well - known textbook examples of the problem is that, when deflation continues, households and firms - - in anticipation of further falls in prices of goods and services and continued uncertainty - - tend to opt for postponing expenditure and reining in borrowing. such behavior could lead the overall economy to prolonged weak growth and deflation, thereby creating a vicious cycle within the economy. furthermore, there also is the complex problem that if deflation drags on, it becomes embedded in the habits of people, making an exit from deflation even more difficult. in the case of japan, it seems that achieving the price stability target of 2 percent has been made more difficult by the fact that the experience of over 15 years of deflation has become entrenched in people's mindset. in light of these points, a complete exit from deflation under the price stability target of 2 percent will ultimately be desirable for households in japan. while the rest of the world is trying to learn the lessons of japan's long period of deflation, we should also face our own experience more squarely. the second point concerns the importance for japan of pursuing price increases that are more or less equivalent to those of other countries. two percent inflation is often referred to as the global standard. more essentially, however, it should be emphasized that the realization of similar inflation rates by japan and other countries will bring stability