masaaki shirakawa : semiannual report on currency and monetary control statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank ’ s semiannual report on currency and monetary control, before the committee on financial affairs, house of representatives, tokyo, 13 july 2011. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. most recently, the bank submitted the report for the second half of fiscal 2010 on june 10, 2011. i am pleased to have this opportunity to talk about recent developments in japan ’ s economy and present an overall review of the bank ’ s conduct of monetary policy. i. economic and financial developments in japan i will first explain economic and financial developments in japan. japan ’ s economy faced strong downward pressure, mainly on the production side, due to the effects of the great east japan earthquake that occurred on march 11. the earthquake disaster caused damage to production facilities in a wide range of areas and consequent constraints on the supply of parts and materials led to supply - chain disruptions. moreover, serious damage to power generating facilities resulted in constraints on electric power supply. production declined sharply mainly due to these supply - side constraints and consequently exports fell. domestic private demand also suffered to a considerable degree, affected in part by a deterioration in business and household sentiment. four months after the earthquake, japan ’ s economic activity is picking up with a gradual easing of the supply - side constraints caused by the earthquake disaster. production has recently shown clear signs of picking up as the restoration of supply - chain disruptions has progressed steadily at a faster - than - expected pace. at least for this summer, the electric power shortages are apparently not constraining economic activity as significantly as initially concerned, due to a strengthening of supply capacity by electric power companies and firms and households ’ efforts to conserve electricity and level out demand. in response to the pick - up in production, exports have started to increase. domestic private demand has also begun to pick up, with some improvement in household and business sentiment. meanwhile, the june tankan ( short - term economic survey of enterprises in japan ), released by the bank at the beginning of this month, showed that business sentiment deteriorated compared with the march tankan, which appeared to have hardly reflected the effects of the disaster. as for the outlook, however, many firms, especially in the manufacturing sector, expected improvements.

among the flexible and internationally used investment currency elite. one example of such necessary reforms would be to eliminate obstacles hindering access to the capital market, such as the quota model for investment in the bond market. the final step towards becoming a globally recognised key currency is for a currency to be used as an international reserve currency. the renminbi's inclusion in the imf's special drawing rights basket has provided the framework for this. it is now expected that a wider range of market participants will invest capital in renminbi - denominated securities. these participants will likely be joined by an increasing number of central banks that will, in the future, invest parts of their reserve assets in corresponding securities, mostly government bonds. 3. what is the role of the frankfurt financial centre in the internationalisation of the renminbi? the renminbi's internationalisation strategy does not culminate with the currency's inclusion in the imf's basket of currencies, however. on the contrary, the chinese government is currently focusing on a whole raft of measures. one of these is the cross - border interbank payment system ( cips ). it was launched in october 2015 and is the sole provider of settlement services for offshore renminbi payments. the people's bank of china designed cips to provide an infrastructural buffer for the expected growth in renminbi transactions and to stem the disadvantages with regard to settlement efficiency vis - a - vis other currencies ( particularly the us dollar ). other measures include bilateral cooperation agreements that aim to further promote use of the renminbi as a trading and investment currency. the potential for efficient renminbi clearing is significant to enterprises that operate internationally. as china's largest european trading partner, germany is of crucial importance in this context. it was not for nothing that the first renminbi clearing hub located outside asia was established in frankfurt. since 2014, it has been possible to settle renminbi - denominated payments via the frankfurt branch of the people's bank of china. this service provides attractive opportunities for small and medium - sized enterprises, for instance, to establish and expand business 2 / 3 bis central bankers'speeches relationships with chinese enterprises while at the same time settling payments with china within their own local time zone and jurisdiction. the china europe international exchange, or ceinex, is another collaborative initiative. this joint venture of the deutsche borse group, the shanghai