and fiscal areas. at the moment, such expectations are not firmly backed by concrete reform plans ; the public therefore restrains spending on concerns over future fiscal developments, and this constitutes one factor behind sluggish economic growth and mild deflation. if this is indeed the case, the experience of japan indicates a possibility that a cumulative increase in government debt, combined with weak growth expectations, might generate deflationary pressures as long as the government retains its credibility with respect to eventual fiscal consolidation. in other words, this is the situation before the loss of fiscal sustainability leads to either inflation or a default on the debt. behind the decline in growth expectations and the cumulative increase in government debt are the aging of the population and the failure of the japanese economy to adjust to it in a flexible manner. there is a limitation, at least in the short run, to changing the demographic trend itself. therefore, given that the rapid aging of the population is likely to continue, strengthening the growth potential through productivity improvements and making the fiscal structure sustainable in the situation of an aging population are the most important challenges for japan in terms of maintaining macroeconomic stability over the medium to long term. bis central bankers ’ speeches

”. the independence of a central bank is not an end in itself. rather, central bank independence helps to maintain a long - term stability orientation of monetary policy by insulating decision - making bodies from short - term - motivated political influence and, thus, contributes to enhancing monetary policy ’ s credibility. it also makes a central banker ’ s job interesting and attractive for academics. has independence helped in containing inflation? the decline in trend inflation worldwide is in part explained by monetary policy in many countries being geared towards price stability, which is enhanced by the increasing independence of central banks in achieving their goals. globalisation will have played a supportive role, but, in the final analysis, it is monetary policy that is responsible for medium to long - term inflation outcomes. academic research has contributed in important ways to such a consensus view. take as examples the rational expectations revolution, the literature on time inconsistency, and the empirical research on the macroeconomic outcomes of central bank independence. monetary policy is arguably the policy area most heavily influenced by academic contributions. and central banks are devoting significant resources to their own research activities. this might be a further reason why, over the past years, academic researchers have been taking up leading positions at central banks. some personal reflections on academics and policymaking let me come back to the heart of the issue – academics and policymaking. keeping with the theme of my speech, i will offer a few thoughts on my transition from academia to the policy world – in particular, how the former experience has prepared me for the latter. at least for me, but i suppose for all of my colleagues who have travelled the road from academia to policymaking, it is certainly true that i never imagined sitting in the driving seat of a central bank when i decided to become an academic. before i was appointed as president of the bundesbank, i held various tenures at german universities. my administrative experience during most of that time was limited to the often painful bureaucratic duties and procedures that are part and parcel of life at german universities. but for some years of my academic career, i enjoyed the privilege of being director of the frankfurtbased center for financial studies. this meant the management of a research institute full of talented economists with productive ideas, and it meant staying in close contact with monetary policy makers and bankers alike which helped me to shape my impression of the environment under which concrete political and business decisions were made. like most of my colleagues, as a young economist an academic career was