joachim nagel : launching a trading desk in tokyo welcoming remarks by dr joachim nagel, member of the executive board of the deutsche bundesbank, at the opening of the enlarged office of the deutsche bundesbank in tokyo, tokyo, 6 september 2012. * 1. * * introduction governor shirakawa, vice minister nakao, ladies and gentlemen, i would like to convey my sincerest gratitude to all those who have helped us to establish a trading desk in tokyo, especially the bank of japan. i would also like to thank the ministry of finance and the financial services agency very much for their support. our decision to start trading operations in tokyo has attracted some attention. i think it would therefore be useful to provide you with some background information on this matter. 2. the deutsche bundesbank ’ s foreign reserves as trading operations in tokyo form part of the management of foreign exchange reserves, let me first provide you with some basic information on the bundesbank ’ s foreign reserves. foreign reserves have three main components : foreign exchange, the position with the imf and gold. germany ’ s foreign exchange reserves amount to around eur 31 bn., of which the majority is invested in us dollar, and also a share is invested in japanese yen. for many years, the total volume of the foreign exchange reserves has been kept quite stable. due to the valuation at market prices, the share of gold within the bundesbank ’ s reserves has increased significantly during recent years. the composition of the reserve assets is less the result of a portfolio optimisation strategy than, first and foremost, a response to gold transfers under the bretton woods system and to foreign exchange interventions prior to the launch of european monetary union. the management of the bundesbank ’ s us dollar und japanese yen portfolio is based on the principles of safety, cost efficiency and liquidity. the trading office in tokyo will essentially be responsible for executing purchases and sales of japanese government bonds during tokyo trading hours. the bundesbank ’ s central office in frankfurt will remain responsible for making strategic decisions and coordinating investment activities. 3. on - site reserve management in april 2009 the bundesbank started to use the premises of its representative office in new york to launch a trading desk for reserve management operations in us treasuries and money market instruments such as repos. so why do we also trade outside of frankfurt? trading activities create contacts with market partners and enable bundesbank traders and analysts to increase their knowledge of

it is important to reinforce the principle of national fiscal responsibility built into the founding architecture of monetary union. those who wish to keep control of their fiscal policy decisions must also bear the consequences. this is also an essential precondition for the capital markets to have a disciplining effect. 5. conclusion ladies and gentlemen, this brings me to the end of my speech. there is no doubt that capital markets perform important macroeconomic functions. the increasingly important role of the capital markets as a source of corporate financing is a positive development, particularly as they diversify firms ’ funding structure and make them less vulnerable to crises. by not participating in the capital market, retail investors are missing opportunities to share in business success. where this is due to a lack of knowledge and understanding, financial bis central bankers ’ speeches education as provided by organisations such as deutsches aktieninstitut can help to gradually increase the participation rate. balanced rules to protect investors and measures to secure financial stability are necessary and in the interests of all capital market participants. finally, i would like to thank you for listening to my arguments and remarks. one last thing : if somebody tells you there is a one hundred euro note lying on the pavement on your way home, do stop and take a look. bis central bankers ’ speeches