governments of dollar assets, largely those by japan and china, have totaled almost $ 240 billion, all in an apparent attempt to prevent their currencies from rising against the dollar. in particular, total foreign exchange reserves for china reached $ 420 billion in november of last year and for japan more than $ 650 billion in december. the awesome size of japan's accumulation results from persistent intervention to suppress what japanese authorities have judged is a dollar - yen exchange rate that is out of line with fundamentals. one factor boosting the yen is a significant yen bias on the part of japanese investors. this propensity, in my judgment, runs far beyond the normal tendency of investors worldwide to buy familiar domestic assets and eschew foreign - exchange risk. nowhere else in the world will investors voluntarily purchase ten - year government obligations at an interest rate of 1 percent or less, especially given a rate of increase in the outstanding supply of government debt that has generally been running at 9 percent over the past year. not surprisingly, very few japanese government bonds ( jgbs ) are held outside of japan. aside from the holdings of the bank of japan, almost all jgbs are held by japanese households, banks, insurance companies and the postal saving system. and none of them holds significant amounts of foreign assets ; 99 percent of household assets are in yen, and, including the postal saving system, about 91 percent of the assets of financial institutions are in yen. japanese nonfinancial corporations do hold a larger share of foreign assets in their securities'portfolios, but the absolute amounts are small. the japanese have made significant foreign direct investments, especially in the united states, and the ministry of finance does, of course, hold large dollar balances as a consequence of exchange rate intervention. but the japanese private sector, by and large, has exhibited limited interest in accumulating dollar or other foreign assets, removing what in other large trading economies would be a significant segment of demand for foreign assets. the degree of domestic currency bias in japan, which far exceeds that of its trading partners, may thus have contributed to a foreign exchange rate for the yen that appears to be elevated relative to the dollar and possibly other internationally traded currencies as well. 1 of course, this preference for yen assets, while a persistent influence on the value of the yen, has at times been overwhelmed by other factors. granted the level of intervention pursued by the japanese monetary authorities has influenced the market value of the yen, but

alan greenspan : technology and financial services remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the journal of financial services research and the american enterprise institute conference, in honor of anna schwartz, washington, on 14 april 2000. * * * i am pleased to participate in today ’ s conference and to join others in the justly deserved tributes to anna schwartz. she has been most interested, among a wide variety of other subjects, in the connections that economic and financial policies have to financial crises. as a consequence, i have decided to speak about technology and financial services, and particularly about risk management, issues that i have spent a good deal of time addressing in recent years. as a related matter, i will comment on supervision and regulation as we move into the 21st century, and of course, i shall find a way to touch on the role of central banks. without doubt, the acceleration in technology that has produced such an extraordinary effect upon our economy in general has had a particularly profound impact in expanding the scope and utility of financial products over the last fifteen years. information technology has made possible the creation, valuation, and exchange of complex financial products on a global basis heretofore envisioned only in our textbooks, and even that just in recent years. derivatives are obviously the most evident of the many products that technology has inspired. but the substantial increase in our calculation capabilities has permitted the putting into place of a variety of other products and, most beneficially, new ways to unbundle risk. what is really quite extraordinary is that there is no sign that this process of acceleration in financial technology is approaching an end. we are moving at an exceptionally rapid pace, fueled not only by the enhanced mathematical applications produced by our ever - rising computing capabilities but also by our expanding telecommunications capabilities and the associated substantial broadening of our markets. all the new financial products that have been created in recent years contribute economic value by unbundling risks and reallocating them in a highly calibrated manner. the rising share of finance in the business output of the united states and other countries is a measure of the economic value added by the ability of these new instruments and techniques to enhance the process of wealth creation. the reason, of course, is that information is critical to the evaluation of risk. the less that is known about the current state of a market or a venture, the less the ability to project future outcomes and, hence, the more those potential