such a backdrop, the japanese economy achieved the best economic performance among major developed economies in terms of price and growth rate. this situation, albeit good in itself, fomented excessive optimism about japan ’ s higher potential growth and, together with the influence of prolonged easy monetary policy, contributed to the creation of economic bubbles of unprecedented scale in the latter half of the 1980s. in the 1990s, japan suffered from deleveraging of excess debt, the aftermath of the bursting of the bubbles. and, since the early 2000s, the japanese economy has gradually come to face a different issue from that in most of your countries. the challenge here is the rapid ageing of the population dragging down the potential growth rate. since the beginning of the 2000s, the growth rate itself has remained low, while the growth rate per working - age population in japan has been 1. 5 % per annum, the highest among the major developed economies, along with germany. it is impossible for me to go through the fifty years ’ history of japanese economy in just a few minutes. what i would like to stress is that we need to identify the new issues that always emerge at different stages of economic and financial development, and find the appropriate policy responses in a timely manner. in any case, changes in the economic environment require a constant review of a central bank ’ s policies and operations. let me start with the exchange rate system. japan currently uses a floating exchange rate system. fifty years ago, we had a fixed exchange rate system. cross - border capital bis central bankers ’ speeches transactions were still quite regulated in those days, despite japan ’ s acceptance of imf article viii obligations. these restrictions were gradually removed and cross - border capital transactions increased dramatically. there was also a sea change in the financial system during the same period. in the 1960s, interest rates were strictly regulated and the capital market was underdeveloped. the major tool for the bank of japan ’ s monetary operations at that time was the allotment of central bank loans with a below - market interest rate, and the role of open market operations was limited. today, the major monetary operation tools have been shifted to the open market operations to control money market interest rates. incidentally, the bank of japan has been deploying various non - traditional policies over the past 15 years, given that we are faced with short - term interest rates that are currently practically zero. in the area of payment and settlement systems, the development of computer systems and information technology brought

to the evolution of central bank monetary policies and operations over the past fifty years by taking the experience of the bank of japan as an example. in considering these changes, i have realized once again the difficulty of reaching a universal definition for such a unique organization as a central bank. today, instead of trying further to precisely define the central bank, i would like to talk about the three points i always highlight regarding the roles of a central bank. bis central bankers ’ speeches first, the most important role of a central bank is to provide a stable financial environment. sustainable economic growth tends to be achieved in a stable financial environment, even if that is not always the case. second, a central bank is an organization that plays its role through banking services. the specialized knowledge required of a central bank is not only knowledge of macroeconomics, but the wisdom to cover a wide range of activities. what is especially important for central banks is practical knowledge related to the details of the circulation of money. borrowing the phrase of one central banker i respect, this kind of knowledge is akin to the knowledge required by a good plumber. third, a central bank is an organization that needs to learn constantly from the changes in the world. earlier, i referred to a stable financial environment. the specific elements from which a stable financial environment is constructed also change with time. when price stability is achieved, many economic entities gain the confidence to take more risk. and, as a result, the stability of the financial system is compromised. this paradox of price stability is a good example of the need for the central banks to stay vigilant and keep learning in a changing environment. the staff members from the bank of japan will now explain the current central bank policies and operations of the bank. we would also like to take this valuable opportunity to learn from your experience and to deepen the ties of cooperation with you. thank you for your attention. bis central bankers ’ speeches