may 30, 2018 bank of japan opening remarks at the 2018 boj - imes conference hosted by the institute for monetary and economic studies, bank of japan haruhiko kuroda governor of the bank of japan i. introduction good morning. i am honored to welcome distinguished guests from academia and central banks to the 24th international conference hosted by the institute for monetary and economic studies. on behalf of conference organizers, i thank all of you here who have kindly taken time out of your busy schedules to participate in this one - and - a - half - day conference in tokyo. the topic of this year's conference is " central banking in a changing world. " over the past few years, our conferences focused on monetary policy issues, yielding important insights and suggestions for the conduct of monetary policy after the global financial crisis. this year's conference expands its scope from monetary policy to " central banking, " that is to say, central bank policies and operations on the whole. behind this is the fact that global structural changes in recent years influence not only central bank policies such as monetary and prudential policies, but also central bank operations such as the issuance of currency and the operation of payment and settlement systems, which provide basis for the conduct of central bank policies. as these changes span a wide range of areas, i think it is helpful to briefly outline recent changes in the global economic and financial environment, especially which are deemed important for central banks. ii. a changing world and central banks in recent years, the global economic and financial environment surrounding central banks has changed significantly. global trade activity has gathered strength again following years of lackluster growth in the wake of the global financial crisis. against the backdrop of the favorable global economic environment, investment activity by financial institutions and other investors around the world has become increasingly active. along with these developments, economic and financial linkages between countries have been strengthening. this increased interconnectedness is, of course, desirable for the global economy, as it reflects ongoing globalization. but at the same time, partly due to the recent dynamics of political economy and geopolitics, the size of global shocks has been increasing, and the spread of global economic shocks has been presenting a great challenge for central banks. regarding the conduct of monetary policy, changes in price and wage dynamics have attracted keen attention in both academia and central banks, especially those in advanced economies. as the adverse effects from the global financial crisis subside, the unemployment rate has dropped in many countries

conclusion asset price bubbles do exist and have potentially large costs for the real economy, particularly in the case of house price bubbles. although their costs are clear their identification is not. the ex - ante detection of costly house price booms is extremely difficult and cannot be done with complete certainty. in addition, identification problems are amplified by data issues regarding house price indices. however, a number of useful predicators of potentially costly boom / bust cycles have been identified by researchers, these include simple deviations of money and credit aggregates from a trend that exceed a given threshold. policy makers can use both proactive and reactive measures to combat costly house price booms. limiting credit risk exposures from borrowers and / or ensuring the resilience of banks would help limit the potential costs of house price collapses. the establishment of the esrb – an bis central bankers ’ speeches independent body responsible for the macro - prudential oversight of the eu financial system – along with the new capital and liquidity measures for banks marks a big step in the right direction. however, the macroprudential policy toolkit is currently in the build - up phase. the current set of instruments is varied and many are already assigned to other policy objectives. the instruments policy makers use will largely depend on the objective they want to achieve. the use of macro - prudential instruments requires a balancing act : on the one hand containing developments judged to contain financial stability risks and on the other hand ensuring that economic growth and financial development is not unnecessarily constrained by an overreaction. as regards the monitoring of asset price cycles and mitigating the risk of credit - fuelled booms, the newly formed esrb, which brings together central bankers, financial supervisors ( both national and european ) and the european commission, is best placed to provide warnings and recommendations to policymakers. we will never be able to create a “ bubble free ” world but, with better support from macro - prudential policy, we can significantly reduce the probability of costly booms. references alessi, l. and c. detken, “ quasi real time early warning indicators for costly asset price boom / bust cycles : a role for global liquidity ”, european journal of political economy, 27 ( 3 ), 520 – 533, sept. 2011. allen, f. and k. rogoff ( 2011 ), asset prices, financial stability and monetary policy, paper presented at swedish riksbank workshop on