8 ). only the central bank is able to issue currency that private economic agents can accept without conditions. therefore, in a financial crisis where the credibility of counterparties is undermined, the role of the central bank becomes extremely important. in the midst of the crisis, it is crucial that financial institutions and investors manage the counterparty risk by controlling not only the amount of exposure at the end of the day but also that of intraday credit. in the past twenty years or so, it has been the role of the central bank, as a bank of banks, to make various efforts to improve the safety and efficiency of payment and settlement systems. such efforts have led to the introduction of real - time gross settlement, delivery versus payment, and simultaneous settlement of foreign exchange ( chart 9 ). without such efforts made by central banks, the lehman shock could have induced a complete termination of financial transactions. if i am asked what the most significant contribution by central banks is in terms of securing economic and financial stability in the past quarter of a century, i could point to their unceasing efforts to improve payment and settlement systems. iii. after the crisis : the effects and limits of aggressive monetary policy lastly i would like to discuss the role of monetary policy in the aftermath of the financial crisis – specifically, when the economy has overcome acute pains but still suffers from chronic affliction of low growth associated with balance - sheet repair ( chart 10 ). when taking monetary easing steps, it is essential to conduct a careful analysis of their intended benefits as well as unintended costs. while aggressive monetary easing is definitely needed after the bursting of bubbles, its side effects and limits should also be taken into consideration. although there is no universal conclusion to such cost and benefit analysis for monetary easing, as it depends on countries and phases, i would like to call attention to the following bis central bankers ’ speeches four aspects, which have not been paid sufficient attention in traditional arguments made before the recent crisis. 3 the first is the burden of balance - sheet repair. even with monetary easing, economic entities with excess debt neither increase expenditures nor embrace more risk taking until their debts are reduced to an appropriate level. monetary easing only mitigates pains associated with balance - sheet repair. moreover, employing this mitigator for a prolonged time comes with costs, as it reduces incentives to lessen excess debt and causes delays in balance - sheet repair, which ultimately is necessary for economic recovery. needless to say, the effect of low

toshihiko fukui : 100th anniversary of the bank of japan ’ s presence in new york remarks by mr toshihiko fukui, governor of the bank of japan, at the reception for the 100th anniversary of the bank of japan representative office in new york, new york, 6 january 2005. * * * distinguished guests, chairman greenspan, president geithner, ladies and gentlemen, it is my great pleasure to welcome you to tonight ’ s event commemorating the 100th anniversary of the bank of japan ’ s presence in new york. beginning of the bank of japan ’ s new york office in 1905, exactly one hundred years ago, the bank opened its office here in new york. its original mission was to oversee the business related to government debt issuance. at that time, japan was engaged in warfare against russia. baron korekiyo takahashi, deputy governor of the bank at the time, was asked to raise the necessary funds - 10 million pounds, between three to four percent of japan ’ s gdp at the time abroad. he first went to london, then the largest financial market in the world. since japan was only a small emerging nation at that time, it comes as no surprise that baron takahashi could only raise half the necessary funds there. fortunately, he came across a prominent american banker, head of kuhn, loeb & co., who agreed to underwrite the remaining half. baron takahashi, who later became governor of the bank of japan and eventually prime minister of japan, wrote in his autobiography that he was utterly surprised by the fact that this american banker literally made the decision overnight. even in those days, it appears, u. s. bankers had boldness and decisiveness when it came to completing a deal. around the time the deal was struck, the yield spreads of the imperial japanese government debt over the british consol, a measure of risk premium against the benchmark of the era, peaked around 300 basis points. it tightened to around 150 basis points one and a half year later. when the first official of our new york office arrived in 1905, he must have had a strong brew of cultural shock. for example, back in tokyo street cars barely started to move on the ground ; whereas in new york, subway service was already in its second year of operation. also, i ’ m certain that he wasted no time in attending a yankee game, whose history in new york started just two years earlier. the year 1905 was roughly half a century