toshiro muto : the 50 - year - long good relationship between hong kong and the bank of japan speech by mr toshiro muto, deputy governor of the bank of japan, at the reception for the 50th anniversary of the bank of japan representative office in hong kong, hong kong, 24 september 2007. * * * good evening. distinguished guests, chief executive of the hong kong monetary authority mr. yam, consul - general and ambassador mr. sato, ladies and gentlemen, on behalf of the bank of japan, let me extend our gratitude to all of you for our long - standing friendship and your cooperation with our hong kong office. in 2004, i was invited to join the visitors programme sponsored by the government of hong kong, and enjoyed a candid exchange of views with senior officials in the government. the bird's - eye view of hong kong's dynamic economic activities which i saw from a helicopter is really unforgettable. since then, i have felt deeply attached to this great city. by coincidence, this year is also the 10th anniversary of hong kong's handover to china. it is my great honor to visit hong kong again today, and hold our 50th anniversary reception, celebrating hong kong's closer economic ties with the mainland and its prosperity as an international financial centre. pioneer days of the hong kong office there is an interesting story behind the establishment of the hong kong office. in 1953, four years before the opening of the hong kong office, the bank planned to open an office in calcutta, india. at that time, the indian city was important for japan as a source of iron ore and cotton. unfortunately, however, two senior bank staff sent to calcutta became ill, probably due to the difference in climate between india and japan. hence, the bank gave up the plan. after this incident, hong kong was chosen as the location for the bank's first representative office in asia. at the time, hong kong was already the information hub in asia, including china, owing to its trading and financial expertise. in retrospect, the decision was appropriate, given hong kong's current prosperity as a leading financial centre in asia and oceania. however, the new - born hong kong office faced adverse winds in the early stages. until the early 1970's, due to lack of diplomatic relationship between china and japan, staff in the office were not even allowed to have official contacts with banks with mainland origins, let alone to visit the mainland

aspiration into action, across the financial sector and the real economy. this phase involves a lot of hard work : the collection of data and the building of new tools that better enable climate considerations to be embedded in strategy and risk management. 1 / 7 bis - central bankers'speeches and i finished with a hope that we were fast approaching the third and final phase – with these tools actively used in financial and business decisions to progress an orderly transition to net zero. since then, a global pandemic, a war and the fastest tightening in financial conditions in thirty years have meant that things have not panned out as we might have expected. let's take stock of where that has left us. taking stock my prism on this is as a central banker and regulator, where we have good sight of how the uk's banks and insurers are building their approaches to climate risks. these firms sit at the centre of the economy, and their responses matter. i have seen a step - change in their approach. they are making more serious investments in developing effective capabilities – both to manage climate - related financial risks and to identify opportunities. but are they enough? let me explore this across four core dimensions : scenario analysis ; firm risk management capabilities ; disclosure ; and green finance. learning from scenario analysis i'll start first with scenario analysis - an essential tool for understanding the size and pathways of unprecedented and uncertain future climate risks. the bank has delivered its first climate scenarios exercise, the cbes. in my view this was transformative, both in shining a light on otherwise opaque risks and in building capabilities. importantly, the exercise required firms to understand how their real economy customers were both exposed to these risks and the actions they would take to manage them. this was one of the most challenging aspects of the work – as it revealed gaps in real economy firms'understanding of what climate transition means for them. a gap i will return to. the cbes also showed that costs were lowest, and opportunities greatest, with an early and well managed transition. that underlines that while governments set public climate policy, banks and insurers have a collective interest in managing climate - related financial risks in a way that supports that transition over time. managing climate related financial risks second, interactions with banks and insurers had revealed them to be in the early stages of developing their climate risk management capabilities. to address this, we set the world's first supervisory expectations for climate risks in 2019 – expectations that became