respective inflation rates around 1980, 3 / 4 bis central bankers'speeches and why inflation in japan has remained consistently below that in the united states since then, including during the period of japan ’ s economic overheating in the second half of the 1980s. the differences in inflation dynamics across economies following the covid - 19 crisis and the inflation differentials between japan and the united states over the long term have renewed my awareness that our understanding of inflation remains limited. i have the impression that this kind of awareness is generally shared by officials in other countries and regions as well, given that central bankers have viewed being “ humble ” as the key since the outbreak of covid - 19. instead of being boxed in by our conventional views, i think it is important for us to be humble in examining the actual price data to understand why inflation in japan is weaker than in the united states and europe, whether the reasons are structural, and whether any of this is likely to change in the future. i hope that this workshop, through an active exchange of views with experts and scholars, will advance our understanding of inflation, including the points i just mentioned. thank you very much for your attention. 1 macroeconomists such as emeritus professor olivier blanchard and professor lawrence h. summers have warned since relatively early on about the risk of persistent high inflation, arguing that aggregate demand expanded by massive u. s. fiscal spending and its multiplier effect is highly likely to go well beyond the potential supply capacity. in contrast, scholars such as professor paul krugman and authorities such as the federal reserve and the international monetary fund have argued that supply - side constraints and shifts in demand are to a large extent transitory factors brought about by the pandemic, and that the increase in inflation is likely to moderate relatively quickly. for an example of a debate among academic economists and central bank economists, see furman, j., “ why did almost nobody see inflation coming? ” project syndicate, january 17, 2022, www. project - syndicate. org / commentary / 2021 - us - inflation - forecasting - errors - economic - models - by - jasonfurman - 2022 – 01. 2 it already had been pointed out in a monthly bulletin that the bank published in 1975 that, as a result of an upward shift in the short - term phillips curve due to a rise in inflation expectations, the long - term phillips curve becomes vertical. for details, see “ 1970 - nendai no se

global - wide impact because of the underlying interconnectedness. the issues of trust, robustness of markets and financial infrastructure, counterparty - risk, information gap, as well as, liquidity will become important possible triggers of the future market disruptions. in addition, geopolitical events or trade tension can also lead to disruptions in global liquidity and trigger a global - wide impact. the main message here is that, going forward, future crises will be different. they will relate less to misalignment in the individual economies because of better policy and regulation, but will relate more to the resiliency of the global system, market and institutions, as well as the ability of the policymakers to prevent or address the vulnerabilities beforehand. forth, for emerging markets, the most threatening externally - induced crises going forward will be those that relate to the concentration of global liquidity, either too much or too little, in the form of large, persistent, and volatile capital flows that overwhelm the capacities of individual countries to manage and adjust to. and the most worrying aspect of this is that the trigger would lie outside the controls of emerging market ’ s policymakers since the flows would be the results of market conditions and policy prescription elsewhere. let me now turn to my second observation on the implications that the changing nature of future crises can have for the conduct of ewe going forward. on this, i have four points to make. first, in view of the changing nature of future crises, it is therefore important that the thrust of the ewe is mindful of this possibility. in my view, the focus of ewe should expand beyond macro - misalignments based on historical relationships to include assessing the robustness and the resiliency of the systemically - important markets, system, and institutions. this means the key objective of ewe will not be to forecast future crises per se, but to identify vulnerabilities in the most important areas in advance, especially those risks that are not covered by market data or by the surveillance process elsewhere. second, for ewe to be effective and comprehensive, it should be done at two levels to cover both the global dimension and the country - specific dimension of risk. the global dimension must be the responsibilities of the imf and the fsb given their comparative advantage as international organization. and as i already noted, ewe by the imf and the fsb should focus on monitoring the development of risk in the