##b netherlands bureau for economic policy analysis. chart 6 industrial production s. a., cy 2015 = 100 cy 06 source : meti. chart 7 price developments at home and abroad japan united states y / y % chg. temporary factors energy < 7 % > services < 50 % > goods < 40 % > cpi ( less fresh food ) < 100 % > - 1 - 1 - 2 - 2 - 3 cy 16 energy < 10 % > services < 45 % > goods < 45 % > hicp < 100 % > notes : 1. figures for services include administered prices. 2. figures for temporary factors for japan are bank staff estimates and consist of the effects of the consumption tax hike, free education policies, the " go to travel " campaign, and mobile phone charges. 3. figures in angular brackets show the share of each component. sources : ministry of internal affairs and communications ; haver. - 1 - 2 - 3 cy 16 - 3 cy 16 energy < 7 % > services < 66 % > goods < 28 % > cpi < 100 % > euro area y / y % chg. y / y % chg. chart 8 cpi for all items less fresh food y / y % chg. mobile phone charges effects of the " go to travel " campaign effects of the consumption tax hike and free education policies energy - 1 - 2 excluding the above factors cpi ( less fresh food ) - 3 cy 16 notes : 1. figures for energy consist of those for petroleum products, electricity, as well as manufactured and piped gas charges. 2. figures for the " effects of the consumption tax hike and free education policies " from april 2020 onward are bank staff estimates and include the effects of measures such as free higher education introduced in april 2020. source : ministry of internal affairs and communications. chart 9 capital stock cycles and expected growth rates business fixed investment, y / y % chg. investment - capital stock ratio at the end of fy 2020 fy 2021 - 5 1. 5 % 1 % 0. 5 % - 10 0 % expected growth rate : - 2 % - 1 % - 15 9. 5 10. 0 10. 5 11. 0 11. 5 12. 0 12. 5 13. 0 investment - capital stock ratio at the end of the previous fiscal year, % note : each broken line represents the combination of the rate of change in business fixed investment and the investment - capital stock ratio at a certain expected growth rate. the figure for fiscal

questions we must answer before pursuing a change in policy, whether in the form of regulation, or in supervisory approach, to facilitate innovation in the financial system. regulators need to ask whether we have considered the intended and unintended outcomes of a new innovation, and do the benefits of the new technology outweigh the risks? would the introduction of a new technology or innovation in the banking system require updating our regulatory framework to incorporate clear oversight? who should have responsibility for oversight, and what roles do we see for different regulators at both the state and federal level? transformational technology requires clear, consistent, and transparent guardrails and expectations to govern the activities that are allowed into the regulated financial system. where current regulation does not contemplate a new activity, should it be acceptable for financial agencies to regulate the activity through supervision and enforcement alone? or should congressional action address the treatment of these activities in the financial system? these are difficult questions, to be sure, but ones we must confront if we are to allow innovation to flourish in the banking system and the broader financial system. ensuring an orderly and observable method for regulators to understand and provide a path for potentially disruptive or transformational technology could ultimately enhance the longterm stability of the financial system. 3 / 6 bis - central bankers'speeches so, while the obligation to promote understanding may fall more heavily on industry, the obligation to be receptive to innovation falls more heavily on regulators. we must fight the temptation to say " no " and resist new technology, and instead focus on solutionshow can we mitigate the risk of new technology? what benefits will technology bring to the financial system? how can we provide clear regulatory expectations? the appeal of resisting innovation - resisting change - is that it preserves the familiar and known. but the cost of resistance to change may be great, in that it promotes stagnation and inertia. ultimately, this could lead to a banking system that may be safer and smaller, but also less effective at providing banking products and services and in supporting the u. s. economy. innovation as a priority in banking understanding and openness can go a long way to promoting innovation, but i think there are opportunities to do more. can we shift from a reactive approach to innovation, to an active one that facilitates innovation? this leads to my final principle, which is that regulators can do more to promote innovation. regulators can do more than simply tolerate innovation, they can promote it through transparency and open