##s to say, however, we remain watchful of stock market developments and their potential ramifications. monetary policy and structural reform as i have discussed, the bank of japan, closely watching various risk factors, is determined to conduct monetary policy in an appropriate and flexible manner with the aim of supporting the nascent economic recovery and preventing the japanese economy from falling into a deflationary spiral. at the same time, i would like you to understand that monetary policy is no panacea, and cannot be a substitute for needed structural reform. needless to say, over the long haul the source of economic growth should be found in the full realization of private sector vitality with the support of various innovations. in pursuing structural reform, both policy efforts and corporate endeavors to directly address structural problems are imperative. in that sense, as i mentioned, we need to continuously re - examine our social and economic system and reduce uncertainties and anxieties surrounding various economic activities to the extent possible, thereby creating an environment in which risk - taking is facilitated. as the central bank of our country, the bank of japan provides a variety of banking services, the quality of which affects the course of japan's economy. therefore, we are willing to contribute to the reform of financial systems by improving the functioning of financial markets and payment systems. currently, we are striving to introduce rtgs - - real - time gross settlement - - which will start on january 4th next year. at the same time, we are also exploring the possibility of adopting electronic systems to carry out operations related to treasury funds. i hope that these assiduous efforts will bear fruit in building an efficient and stable financial system. concluding remarks in reviewing economic developments in japan, i have presented my view of the challenges facing us and the basic stance concerning the conduct of monetary policy. now that we are close to the dawn of the twenty - first century, let me wind up my speech with a brief overview of the economic developments of the past century. over the past 100 years, annual growth has averaged 3. 3 % in the us and 1. 9 % in britain. both nations experienced two world wars and several smaller ones. on the economic and financial fronts, they both experienced rampant inflation and deflation, as well as severe financial disruption. and, it was some twenty years ago that the decline of their national power was debated. as for the recent five years, however, both the us and the uk have achieved average growth of 4

the “ price stability target ” of 2 percent at the earliest possible time. concurrently, the government announced that it would not only flexibly manage macroeconomic policy but also strongly promote measures for strengthening the competitiveness and growth potential of japan ’ s economy as well as steadily promote measures aimed at establishing a sustainable fiscal structure. as mentioned earlier, the growth strategy – which aims at restoring the flexibility and adaptability of japan ’ s economy and raising its potential – is extremely important for japan. furthermore, japan ’ s fiscal situation is very severe compared with other countries. although yields on japanese government bonds ( jgbs ) are stable at a historically low level, this is simply because the credibility of japan ’ s fiscal management in financial markets has been ensured. if such credibility were to falter, interest rates would rise substantially, undermining the effectiveness of monetary policy as well as increasing the loan burden on individuals and firms, and inflicting damage on the business conditions of financial institutions with jgb holdings. the economy would naturally be affected adversely. these developments would also increase interest payments on jgbs and subsequently lead to a worsening fiscal situation. such a case must be avoided. this necessity is made apparent by the recent situation in the euro area. the bank has been purchasing a large amount of government securities and will continue to do so. in order for the bank to proceed with massive monetary easing, it is extremely important to steadily promote measures aimed at establishing a sustainable fiscal structure. as i have described, the bank will work together with the government and do its utmost to overcome deflation early and achieve sustainable economic growth with price stability. bis central bankers ’ speeches