after the establishment of formal diplomatic relationship between the united states and japan, and by then the number of japanese citizens in new york had started to pick up. in fact, this place where we are all gathered tonight, the nippon club - which stands for japan club - will also be celebrating its 100th anniversary this year. benefits from the presence in new york the new york market has continued to grow over the years. time and again, japan has benefited from financial activities in this market. debt issuance following the great kanto earthquake of 1923 is one such instance. when the deal was arranged, the governor of the bank at the time, junnosuke inoue, played an important role. it is interesting to note that his first hand knowledge of the new york market as well as the bonds he formed with u. s. bankers during his tenure as general manager of our new york office proved to be quite valuable for future endeavors. equally significant has been the fact that, over the years, we have had the pleasure of engaging ourselves in countless discussions with such eminent figures as market participants, distinguished scholars, and especially the esteemed federal reserve officials, on topics ranging from monetary policy to financial market developments. on december 1913, the federal reserve act was enacted, and the following year, the federal reserve bank of new york came into existence. through the discussions with the fed, we have 7developed common understandings, such as : the importance of price stability for sustainable economic growth ; the importance of a sound financial system as well as liquid and well functioning financial markets. today, the primary responsibility of the new york office is to develop a channel for a candid dialogue with respectable people widely in the region it covers, that is, both north and south america, but the crucial part is of course the united states, above all, federal reserve officials and banking communities here. it is no exaggeration to say that new york office has been very successful in creating a bond of trust between us. this strong partnership has helped us weather a storm at times of difficulties. at times of no difficulties, too, our new york office gave essential inputs to discussions in tokyo, thereby enabling us to learn a lot about not only the u. s. economy but also economic and financial developments in the world. let me emphasize that our new york office is performing a very important role within the bank of japan. that is not just my personal view, but the entire policy board of the bank appreciates the contribution

, in : econometrica, vol. 71, no. 1, pp. 173 - 204. brunnermeier, m. and l. h. pedersen ( 2009 ), “ market liquidity and funding liquidity ”, in : review of financial studies, vol. 22, no. 6, pp. 2201 - 2238. regulation ”. 4 the policy conclusions include both crisis prevention – with recommendations like the introduction of macro - prudential regulation or liquidity regulation – as well as crisis management with analyses of toxic asset purchases, asset guarantees or mortgage subsidies, for example. notwithstanding the important theoretical advances to which markus brunnermeier contributed substantially, there is still much to be learnt about the root causes, the triggers and the propagation mechanisms of the financial turmoil, and how precisely it spread to the real sector, causing a deep financial and economic crisis arising from negative feedback loops between the two sectors. the severe challenges for policymakers posed by the existing knowledge gaps are reflected in the very controversial debates about the optimal responses to mitigate and resolve the current crisis and to prevent future crises from occurring. quick progress on these and related research topics is essential for the ecb both from a monetary policy and a financial stability perspective. while at present the ecb already performs certain tasks which shall contribute to safeguarding the stability of the financial system, it is foreseen that the range of tasks and responsibilities of the ecb related to financial stability matters becomes substantially enlarged. according to the recent proposal by the european commission on the reform of financial supervision in the european union, drawing on the recommendations of the de laroisiere high - level group, the ecb would play an important role in a new european systemic risk council to be in charge of macroprudential financial supervision in the european union. for the ecb to effectively perform such tasks requires, among other, major investments into a supporting macro - prudential analytical infrastructure, for example the development and implementation of a suite of early warning signal models and the significant extension of existing macro stress testing models. but we also need innovative approaches on optimal policy responses once macro - prudential risks have been identified, since the european systemic risk council will also have to issue policy recommendations. in contrast to the assessment of systemic risks where we have a basis to build on and where our staff has also made research contributions to the literature, macro - prudential regulation or policy is a relatively new concept for which a