could permit an appropriate reaction to potential excesses in asset markets, for example. using interest rates to counter such developments is not appropriate, warned lautenschlager, because it could jeopardise the primary objective of price stability. it is thus all the more important that the ecb ’ s governing council should have more tools at its disposal to counter imbalances. * * * my speech today is devoted to a relationship – to be precise, a triangular relationship. it ’ s about what makes a complex, yet successful relationship which does justice to the common and different goals and interests of the three parties. starting this year, a triangular relationship, and in particular the workflows and decisionmaking processes within it, is playing a specific role for the ecb, because in less than two months the single supervisory mechanism ( ssm ) officially begins its operations – and then three policy areas will come under the umbrella of the ecb. monetary policy will remain, of course, our main task. the ecb will additionally take on responsibility for banking supervision in the euro area. and we will play an important role in calibrating and implementing macro - prudential supervision, even though national authorities will continue to be primarily responsible. bis central bankers ’ speeches each of these policy areas has its mandate, goal and instruments. the task of monetary policy is to ensure price stability. in this respect, interest rate policy is the standard instrument ( although there are now quite a number of measures that are non - standard ). the supervisory objectives are to ensure the safety and stability of the banking system as a whole. the supervisory authorities have had, since the crisis, a veritable arsenal of instruments which mainly concern the risk - bearing capacity of individual banks. the objective of macro - prudential policy is the stability of the financial system as a whole. even though the ecb has of course exerted influence on financial stability via its monetary policy, starting in november it will additionally use capital - based and liquidity - based instruments – in respect of the institutions it directly or indirectly supervises. despite their differences, the three policy areas of monetary policy, banking supervision and financial stability plus macro - prudential supervision are closely linked. one could even argue they are in a triangular relationship : they influence comparable variables ( such as consumption and investment ) and operate via the same transmission channels ( such as bank lending ). instruments which are used in one of the three policy areas inevitably affect the other

exception and the bank of japan law sets its objective as " contributing to the sound development of the national economy through the pursuit of price stability. " although many central banks carry price stability as their primary objective of monetary policy, whether such an objective is defined in the form of a specific numerical target depends on each country. the federal reserve and the european central bank do not employ inflation targeting. on the other hand, in the case of the united kingdom, inflation target was set at 2. 5 percent by the government in 1997 and has been maintained thereafter. even in this case, however, the bank of england does not conduct monetary policy mechanically but rather in a flexible manner : it has sometimes lowered the policy interest rate when inflation was above the target and tightened when inflation was below the target. what is important here is that the uk government itself assumes significant responsibility in setting the inflation target. the mandates of the uk treasury require fiscal policy to ensure sound public finances over the medium term and, at the same time, to support monetary policy over the short term. in the case of japan, to discuss the issue of whether the government should decide the objective of monetary policy beyond those stipulated in the bank of japan law, we believe that the following points should be examined : the objective itself ; consistency between the target and necessary policies to achieve it ; cooperation from the government, including fiscal policy, to achieve the target. 7. conclusion i have covered various issues today. before finishing my remarks, as a conclusion, i would like to briefly summarize my view on what the government and the bank of japan should do in order to overcome the current severe economic situation. the first point i would like to make here is that the government and the bank of japan completely share the policy objective : needs to prevent a continuous decline in prices and to bring the economy back to a sustainable growth path as soon as possible. the bank of japan commits itself that the current procedures for monetary operations will be maintained until the annual cpi inflation rate restores the level at or above zero percent in a stable manner. second, the bank of japan has already established a framework to provide sufficient liquidity to the economy. under the framework, the bank provides far more current account balance than required to achieve zero short rates. therefore, lack of liquidity should not be a cause for difficulties in financing economic activity as a whole. although it is rarely pointed out, the current pace of growth in the monetary base is significantly exceeding that in the period after the