may 29, 2019 ba n k o f j a p a n opening remarks at the 2019 boj - imes conference hosted by the institute for monetary and economic studies, bank of japan haruhiko kuroda governor of the bank of japan i. introduction good morning. i am honored to welcome such distinguished guests from around the globe to the 25th boj - imes conference. on behalf of the conference organizers, i thank all the guests in this room. this year ’ s conference is titled “ central bank design under a continued low inflation and interest rate environment. ” the current theoretical framework for monetary policy was developed before the global financial crisis. at that time, inflation and interest rates in most advanced economies – with japan being the notable exception – were high enough to make conventional monetary policy effective. to stimulate the economy, central banks had sufficient safety margins to reduce short - term nominal interest rates. after the global financial crisis, however, this situation changed significantly. both inflation and nominal interest rates have remained far below their pre - crisis levels for more than a decade. in my opening remarks, i will briefly review the policy agenda for central banks at the moment under a continued low inflation and interest rate environment. ii. policy agenda under a continued low inflation and interest rate environment this year ’ s conference focuses on four topics : the monetary policy framework, monetary policy instruments, the relationship between price stability and financial stability, and spillovers to emerging and developing economies. a. monetary policy framework regarding the monetary policy framework, textbook new keynesian models assume that long - term inflation expectations are anchored around the inflation target and the central bank sets the policy rate mechanically referring to the natural rate of interest. when these assumptions hold, all that the central bank needs to do to stimulate the economy is to keep real interest rates below the natural rate of interest. however, this conventional policy framework currently faces two major challenges. the first challenge concerns the question to what extent policy makers should rely on the natural rate as a benchmark for monetary policy conduct. this problem is partly associated with the difficulty of measuring the natural rate of interest. 1 of course, this problem can be overcome to some extent by looking at common trends in a range of estimates of the natural interest rate. in fact, various recent estimates of the natural rate of interest suggest that the current level appears to be much lower than before, giving rise to concerns about a secular decline in the natural rate of interest. the other major challenge is related to the stability

, professor carl walsh of the university of california, santa cruz, the new honorary adviser to imes, will share his views on monetary policy frameworks under a low inflation and interest rate environment from an academic perspective. as the author of the textbook monetary theory and policy, which is a must - read for central bank economists, and of various other significant contributions to the literature, he is one of the most influential academics in this field. next, the paper presentations will focus on the following four topics : first, optimal monetary policy taking international capital inflows into account ; second, the reversal interest rate ; third, the tinbergen rule for financial stability and price stability ; and fourth, the impact of prolonged low nominal interest rates on banking stability. the final and concluding session will be the policy panel discussion, moderated by see powell ( 2018a ) for the current view of the federal reserve board. see rajan ( 2015 ) for a discussion of the spillover. professor athanasios orphanides of the massachusetts institute of technology, another honorary adviser to imes. as panelists, we will have mr. christian hawkesby, assistant governor of the reserve bank of new zealand ; mr. klaus masuch, principal adviser to the director general economics of the european central bank ; and mr. masazumi wakatabe, deputy governor of the bank of japan. i hope that the theoretical and practical discussions in this conference will deepen our understanding of central bank design under a continued low inflation and interest rate environment. thank you for your attention. references borio, claudio e. v., and philip william lowe, “ asset prices, financial and monetary stability : exploring the nexus, ” bis working paper no. 114, bank for international settlements, 2002. heider, florian, farzad saidi, and glenn schepens, “ life below zero : bank lending under negative policy rates, ” ecb working paper series no. 2173, european central bank, 2018. maddaloni, angela, and jose - luis peydro, “ bank risk - taking, securitization, supervision, and low interest rates : evidence from the euro - area and the u. s. lending standards, ” review of financial studies, 24 ( 6 ), 2011, pp. 2121 – 2165. powell, jerome h., “ monetary policy influences on global financial conditions and international capital flows, ” speech at “ challenges for monetary policy and the g