states. on the supply side, the constraints may not be as severe as in the united states. while shortages of intermediate inputs have had some impact, labor supply has room to expand thanks to so - called labor hoarding during the pandemic. differences in labor supply stance have also resulted in differences in wage growth between countries. in japan, wages have risen, but the rate of increase has remained moderate. also, the recent surge in commodity prices due to supply factors puts greater downward pressure on the economies of commodityimporting countries through a decline in household real income and corporate profits. in this situation, attention will be focused on how firms pass increasing costs on to prices and how they determine the level of price increases that households are willing to accept. given these differences in the supply and demand effects, the appropriate monetary policy response will also differ between countries. a common challenge for each country is to determine the magnitude and persistence of the inflationary pressure. in doing so, it will be important to capture the relationship between three prices, namely, the price of goods and services, wages, and commodity prices. a surge in geopolitical risk another challenge facing central banks is the surge in geopolitical risk triggered by the russian invasion of ukraine. this has induced a further increase in commodity prices. and it has increased inflation worldwide. in addition, uncertainties over geopolitical risk are extremely high. these uncertainties could put downward pressure on the global economy by shrinking trade and damaging confidence. in addition to the real economy, close attention has to be paid to financial market sentiment, the global financial system, and cybersecurity. furthermore, if views on geopolitical risk were to change permanently, this could have a longer - term impact on the global economy through structural changes in trade and capital flows. recognizing how extremely uncertain and fast moving the current situation is, central banks are required to implement the appropriate policy measures. iii. frontiers in central banking in addition to these challenges, new challenges have emerged in the frontiers that central banks should develop. i would like to point out three areas. structural change in the economy the first frontier is the acceleration of structural changes in the economy amid the prolonged pandemic. the digitalization and automation of society and the economy were in progress even before the pandemic, and having been accelerated by the pandemic, they have expanded and deepened rapidly. along with this, a restructuring of supply chains has been observed. also, since the effects of

may 25, 2022 bank of japan opening remarks at the 2022 boj - imes conference hosted by the institute for monetary and economic studies, bank of japan kuroda haruhiko governor of the bank of japan i. introduction it is my great pleasure to welcome you all to the 2022 boj - imes conference. on behalf of the conference organizers, i would like to thank you all for your participation. this is the 27th conference since its start in 1983. due to the continuing effects of covid19, the conference is being held online, as last year. the previous conference was very fruitful with lively and wide - ranging discussions on the theme of " adapting to the new normal : perspectives and policy challenges after the covid - 19 pandemic. " since then, however, the environment surrounding central banks has changed dramatically. given these developments, the themes for discussion appear to have expanded rapidly. that is why i think this is the ideal opportunity for central banks, international institutions, and academia to gather and exchange opinions. against this background, the theme of this year's conference is " new dimensions and frontiers in central banking. " now i would like to provide an overview of the theme, focusing on the new dimensions faced by central banks and the frontiers they are developing. ii. new dimensions in central banking first of all, i would like to point out two challenges currently facing central banks. a surge in inflation the first challenge is a global surge in inflation. for most central bankers and researchers, this is not something they could have imagined at the emergence of covid - 19. the unique feature of inflation this time is that both supply and demand inflationary factors have occurred at the same time. on the supply side, constraints on production capacity have given rise to inflationary pressure. these constraints include disruptions to the supply of raw materials, a shortage of semiconductors, and labor shortages. on the demand side, as economic activity has recovered globally since last year, solid demand from households has materialized. a shift in demand from services to goods has occurred amid the continued pandemic. these two factors have brought about upward inflationary pressure, especially on the price of goods including the price of commodities. that said, when it comes to these supply and demand effects, there are both similarities and differences between countries. for example, in japan, household pent - up demand has been limited and the recovery of aggregate demand has been slower than in europe and the united