- trade infrastructure of securities markets in asia. this would enhance the resilience of the financial system as asia ’ s financial markets continue to develop. as i mentioned earlier, japan ’ s payment and settlement systems were not disrupted by the great east japan earthquake, and have continued to function effectively, helping to ensure financial and social stability. the role of payment and settlement systems is to settle claims and obligations arising from transactions. while the infrastructure making financial contracts straightforward and smooth could be compared to arteries pumping out blood into the body of the economy, the payment and settlement system would then be the veins carrying the blood back to the heart ( slide 4 ). both of them are absolutely necessary for the proper functioning of the financial system, especially for cross - border transactions. the international financial system would stall if the veins, or the payment and settlement system, became choked with blood clots. in this respect, it is extremely important to ensure the safety and efficiency of the payment and settlement system, as well as its stable operation, even in times of crisis. from the cross - border perspective, however, i recognize at least two problems in the post - trade infrastructure for cross - border securities trading in the asian region. 6 the emeap was established in 1991, and consists of eleven central banks and monetary authorities in the asia and pacific region, namely australia, china, hong kong, indonesia, japan, korea, malaysia, new zealand, philippines, singapore, and thailand. under the abf initiatives, emeap member central banks invest a portion of their foreign reserves in sovereign and quasi - sovereign bonds of eight emeap jurisdictions. the abf initiatives have promoted the recognition of local currency - denominated bonds issued in asia, and acted as a catalyst to accelerate and harmonize legal, regulatory, and tax reforms related to bond investments in the region. the abmi has also made a variety of efforts and achievements, including providing technical assistances and credit guarantees, as well as enhancing information disclosure for investors, aiming at improving the issuance and investment environment on government and corporate bonds in the region. there have been relative improvements in domestic payment and settlement systems in asia. online securities payment and settlement systems have been constructed, and delivery - versus - payment settlement has been achieved. many jurisdictions have also already realized settlement cycles of t + 2 to t + 3. further improvements may still be needed in some jurisdictions to establish legislation on settlement finality. bis central bankers ’ speeches first, settlement risks associated

both the public and the private sectors. in attempting to strike a better balance in such trade - offs, we should follow three basic principles. the first is to respect the choices of market participants using the payment and settlement systems and ensure good governance. the second is to enhance the use of central bank money in payments and settlements as a means of reducing settlement risks. the third is to adopt a gradual approach that takes into account the differences in the degree of market liberalization among asian economies. the use of cross - border collateral arrangements by central banks could be one of the measures used to maintain market liquidity in times of crisis. if we have an infrastructure in which central banks can be flexible in providing their local currencies against highly liquid foreign assets as collateral, this would contribute to the smooth funding of locally active financial institutions, and thereby enhance the stability of domestic financial markets. in addition, a variety of identification codes and message formats are used in the payment and settlement systems, and they still fall short of the international standards. discussions have been held at the abmi of the asean + 3 process and other forums on ideas to build a cross - border payment and securities settlement system in the region. we should continue to make progress in these discussions and take measures to put the ideas into action in each field, ranging from removing transaction impediments to developing payment and settlement systems, and to test them in practice. bis central bankers ’ speeches japan has made substantial improvements in the post - trade infrastructure for japanese government bonds, which have the largest market volume in asia. improvements have been made, for example, in aspects of the payment and settlement system, the legislation governing securities settlement, and the tax system for non - residents. i believe that our experience will also be helpful in promoting the development and stability of financial markets across the asian region. working in close cooperation with the relevant institutions, the bank of japan hopes to be able to contribute to the development of financial infrastructures in both japan and the asian region by sharing the knowledge obtained from our experience. now, let me wrap up. motivated by the lessons of the asian currency crisis, asia is the most active region in terms of policy cooperation and coordination aimed at building robust financial markets and systems. however, to be honest, the policy goal has not yet been fully achieved, as the markets and systems are still under - developed. we asian policymakers need to make more cooperative and coordinated efforts to construct better systems ( both in terms of hard and soft