such as the economic variables on which policy should focus, or in other words, the choice of intermediate objective. in some countries, germany among them, policy is targeted at a monetary aggregate, while in others a strategy of direct inflation targeting is pursued. alternatively, monetary authorities may focus on a range of economic indicators, as is done in the united states. i will not go into the pros and cons of these methods here today. in the european context, the emi has concluded that in practice the differences between the various policy strategies that could be pursued by the escb are not as large as in theory. a decision is to be taken by the ecb on this point next year. 3. looking at the structure of the fed, we see three components, specifically the board of governors, the regional reserve banks and the federal open market committee ( fomc ). the fomc issues a periodic guideline for monetary policy, while the board serves as the executive body. it is empowered to adjust policy, within the mandate provided by the fomc, when necessary in the period between fomc meetings. thanks to a rotation system, the reserve banks are involved in fomc decision - making on an alternating basis. the american legislature obviously meant the fed to have a decentralized structure, in which the regional reserve banks can each have their say. the aim was to prevent fed policy - makers from catering unduly to the wishes of either the financial centre, i. e. new york, or the political hub, i. e. washington. in spite of the decentralized nature of the federal reserve system, however, a certain specialization tendency has increasingly developed over the years, due in part to technological innovations and market developments. take, for instance, the operations ensuing from the fed ’ s monetary tasks, such as money and foreign exchange market interventions. these are effected in their entirety in new york. in other areas, too, such as the payments system, the reserve banks have developed their own specializations. 4. in determining monetary policy, the fed relies on regional input. the reserve banks contribute to policy through their role in the discussions and the number of votes they can cast ( five out of a total of twelve ) at fomc meetings. at these meetings no fixed policy proposals are presented in advance, the aim being an open discussion where the various parties reach agreement through mutual persuasion. any decision should, after all, be endorsed by as

is important to fully take into account the side effects of qqe that may emerge over a considerable period of time and conduct monetary policy in a more forward - looking manner than when conducting the conventional interest rate policy. relative to other economic measures, the side effects of monetary policy are difficult to grasp until they actually materialize. therefore, i believe that the bank should thoroughly explain the side effects of qqe widely to the public and show that it conducts policy paying full attention to these effects. i believe that this will enhance the credibility of the bank ’ s policy, and thereby boost the policy effects. d. examination and comparison of positive effects and side effects of qqe so far, i have described in detail the positive effects and side effects of qqe. my understanding is that, while the positive effects are largely determined by the amount outstanding of the bank ’ s jgb holdings – that is, the stock of its jgb purchases – the side effects, such as the decline in jgb market liquidity, are considerably affected not only by the stock of the bank ’ s jgb purchases but also by the pace of such purchases – that is, the flow of these purchases. it is already the case that long - term real interest rates have become less likely to decline despite the increase in the amount outstanding of the bank ’ s jgb holdings, and therefore additional effects of qqe clearly have been diminishing. given this situation, i bis central bankers ’ speeches consider that a reduction in the pace of bank ’ s jgb purchases will reduce the side effects of qqe without significantly constraining the positive effects, thereby enabling the balance between the positive effects and the side effects to improve marginally. as i mentioned earlier, my policy proposal is not to reduce the stock of the bank ’ s jgb purchases but to reduce the flow of such purchases. in my view, the cumulative effects of qqe have already firmly taken hold in the economy, and such effects will not diminish significantly unless the bank reduces the amount outstanding of its jgb holdings. if normalization of qqe – such as the measure to reduce the pace of the bank ’ s jgb purchases – is postponed in fear of a negative market reaction, this could further increase the potential risk of financial markets becoming unstable, which consequently could ruin the positive results of qqe gained so far. the success of qqe will be judged at the time when its normalization