haruhiko kuroda : the virtues of international cooperation among central banks remarks by mr haruhiko kuroda, governor of the bank of japan, at a reception to celebrate the 30th anniversary of the bundesbank ’ s representative office, tokyo, 22 may 2017. * * * good evening, ladies and gentlemen. it is a great honor to be invited to this reception celebrating the 30th anniversary of the deutsche bundesbank in tokyo. i would like to extend my sincere congratulations to dr. dombret, executive board member of the bundesbank, ms. moede, representative of the tokyo office, and other staff members of the bundesbank. throughout these 30 years, the bundesbank has positioned its tokyo office as the hub for its activities in asia, and has shown its strong commitment to japan. i would like to highlight in particular, the expansion of the functions of the tokyo office with the establishment of a trading office in 2012, just one year after the tragic great east japan earthquake. looking around at all the faces gathered here to celebrate this anniversary event, i must commend the bundesbank tokyo office on their great success in establishing a deep and extensive network in the local community. over the past 30 years, there have been significant advancements in the global economy. the growth rate of trade volume, which until the 1980s followed a similar rate to real gdp, significantly outpaced real gdp from the 1990s to the mid - 2000s. one of the contributing factors was the expansion of global value chains from the late 1980s with the end of the cold war, when large amounts of direct investment began to flow into countries of the eastern bloc, such as china, the member states of the former soviet union, and eastern europe, as they entered into the global economy. both germany and japan played pivotal roles in this new wave of globalization. the advancement of globalization over the years has brought about stronger relationships among countries and regions, both economically and financially. on the other side of the picture, as evident in the case of the asian currency crisis 20 years ago or the global financial crisis that erupted 10 years ago, negative shocks are more likely to transcend national borders. in this situation, international cooperation among central banks has become ever more important. in terms of the relationship between germany and japan, the bank of japan established a representative office in frankfurt in 1956. making the most of the representative offices in each other ’ s countries, the deutsche bundesbank and the

decisions. institution that, in the words of joel gray in the 1972 film of cabaret, makes the world go round. and i shall try to relate the origins of money as a social institution to the role of the monetary policy committee today. let me begin, though, with adam smith himself. despite a rather solitary life, much of it here in kirkcaldy, and shunning invitations to join friends in edinburgh, let alone london, he wrote two great works – the theory of moral sentiments and an inquiry into the nature and causes of the wealth of nations – that owe much to careful observation of the world and contain numerous practical examples of how industry and society worked. they are no dry academic treatises but commentaries on the world around him. they contain many insights, two of which are particularly relevant to my theme. first, to reap the benefits of the division of labour requires social institutions that give confidence to people to take up specialised employment. social institutions and market economies go hand in hand. second, people who, for the most part, pursue their own self - interest, are also prepared to stand back and ask how their actions should be constrained by social institutions. such institutions arise because we build them. on the first, the wealth of nations begins with the most famous example of smith ’ s commentary. he explains the idea of the division of labour by looking at a “ very trifling manufacture ”, namely “ the trade of the pin - maker ” : “ a workman not educated to this business … could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. but in the way in which this business is now carried on, … it is divided into a number of branches … one man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head ; … the business of making a pin is, in this manner, divided into about eighteen distinct operations ”. 4 smith describes seeing a small factory of this kind in which the daily output of pins was almost 5, 000 for each person employed. specialisation increases productivity. the division of labour permits “ this great increase of the quantity of work ”. 5 but the higher living standards which the division of labour permits require institutions that allow us to exchange what we each produce. smith described how “ in a nation of hunters, if any one has a talent for making bows