ryuzo miyao : a macroprudential perspective in the conduct of monetary policy speech by mr ryuzo miyao, member of the policy board of the bank of japan, at the 2011 asia economic policy conference, san francisco, 30 november 2011. * * * introduction first of all, i would like to thank the organizer of this conference for inviting the bank of japan and allowing me to exchange views among such distinguished panelists and scholars. today i would like to highlight one of the key issues regarding the conduct of monetary policy, namely a macroprudential perspective in monetary policy making. more specifically, i will discuss how to take into account the risk of accumulation of financial imbalances in the conduct of monetary policy, which could help prevent financial bubbles and subsequent crises. i would also like to introduce our experience and summarize what the bank of japan has done so far in this regard. you may find it somewhat premature to talk about how to prevent future crises given that the world is still struggling in the aftermath of the global financial crisis. however, in order for asia to keep playing a leading role in the global economy, the issue must be of great importance, although i should immediately add that we have not observed excessive financial imbalances in the region. looking back at the period after the asian crisis, we have witnessed a series of incidents that can be deemed crises. it appears that the frequency of such incidents is rising and that efforts to deal with one crisis might have provided the seeds for a subsequent crisis. in the coming years, asia will not be allowed the luxury of simply being pleased with the situation. i. the essence of the global financial crisis as background, let me briefly review the essence of the global financial crisis. although a variety of economic and financial factors are involved, the essence of the global financial crisis is the formation and bursting of the credit bubble. in forming the bubble, the household sector in the united states expanded borrowing and consumption along with the boom in housing prices. on the financial front, new types of transactions such as securitized products and derivatives prevailed, and leverage also increased significantly. such excess in real economic activity, asset prices, and financial markets had a shared influence among each of these components, and this led to further excess that spread beyond national borders, resulting in the global credit bubble. balance - sheet adjustment has continued to constrain recovery in many countries, which is typical after the bursting of a large - scale credit bubble.

banks managed to eliminate their reliance on the emergency liquidity assistance and regained access to the wholesale markets, issuing senior unsecured notes and capital instruments. two systemic banks also managed to tap the capital markets and executed successful share capital increases in 2021. currently, banks enjoy adequate liquidity and capital buffers that can allow them to provide lending to the real economy. still, the npl ratio remains the highest in the eurozone and is an impediment to credit expansion, especially to small businesses where the credit risk is higher. securing financing for investment in greece is crucial in order to meet future challenges. investment has declined dramatically during the global financial and debt crisis and has not recovered significantly since. in 2020, investment in greece stood at close to 12 % of gdp whereas the euro area average was almost 22 % of gdp. greece obviously needs an investment shock to augment the eroded capital stock, increase productivity and overcome output hysteresis. investment has recovered sharply in the first three quarters of 2021, supported by a significant increase in bank credit to nonfinancial companies since the start of the pandemic. and the eib has played an important role to that since, together with the european investment fund, provided support for private and public investment of 4. 85 bn euros. this is a significant increase from the previous record of 2. 8 bn euros delivered in 2020. eib group financing in greece represented 2. 7 % of national gdp, the largest engagement in any country worldwide. as regards non - financial corporations, in 2021 more than 10 % of new bank business loans were supported by financial instruments related to the eib or the eif. looking ahead, the role of the eib will remain crucial. following the agreement between eib and the ministry of finance, eib will manage 5 bn euros in the context of the national recovery and resilience plan. via this agreement, the eib will utilize funds of the rrf loan facility for onlending to private investments. the rrf loan facility will cover up to 50 % of each investment project, while the remaining amount will be covered by eib ’ s and beneficiaries ’ own funds. greece will benefit from the technical, economic and financial expertise of the eib in identifying high - impact projects and effective structures, which will significantly contribute to make the best use of the rrf funds. greek businesses and entrepreneurs will also benefit from access to financing as a result of the partnership between the country