january 17, 2019 bank of japan opening remarks at the g20 finance and central bank deputies meeting haruhiko kuroda governor of the bank of japan good afternoon. it is a great honor for me to work with you and to serve as co - chair with minister aso at the g20 finance ministers and central bank governors meetings this year. the g20 was established in 1999, twenty years ago. it was the year when the euro was introduced and two years after the asian financial crisis. i attended the inaugural meeting in berlin as vice - minister of finance for international affairs. the main objective of the g20 was to promote cooperation among systemically significant economies including emerging market economies, in order to achieve stable and sustainable global growth. later, the leaders'summit was initiated in response to the global financial crisis in 2008, and the g20 played a significant role in coordinating policy responses to the crisis. since then, as the world economy has recovered from the crisis, the g20 has discussed a wide range of issues to promote strong, sustainable, balanced, and inclusive growth. while the role and agenda of the g20 have evolved over time, i would like to point out three important values that have been emphasized consistently, based on my long - time involvement in the g20 since its inauguration. first, we recognize that the expansion of cross - border transactions of goods, services, and finance will benefit all countries. we need to conduct policies so that many people can enjoy the positive effects of international trade and capital flows on growth and productivity gains, while minimizing their potential negative impacts. second, we need to be forward - looking in preparing for policy responses to medium - to long - term challenges. for instance, under japan's presidency this year, we will discuss policy responses to aging. japan is currently the most aged society in the world. sooner or later, however, other economies will face a similar situation. many issues must be considered in our efforts to cope with an aging society, including fiscal, monetary, and structural policies. i believe the g20 provides a valuable forum for discussion and mutual understanding of these issues. third, we value the importance of inclusive growth, that is, the dividends of economic growth should be distributed fairly and equally across the whole society. the g20 has discussed policy agendas to enhance the overall living standards of low - income countries in a sustainable manner. in addition, we need to address the increasing inequality in advanced economies as well, taking

into account future risks over the long run, economic fluctuation during the bubble period might have been less. as a matter of fact, it is extremely difficult to identify whether it is a bubble or not when we are actually experiencing bubble expansion. one of the reasons for this difficulty is that we cannot exclude from the observed reality the impact of changes in economic structure. for example, during the bubble period many presented a seemingly plausible argument that a rapid rise in property prices in tokyo could be justified in view of the increasing role of tokyo as an international financial center, but which could not be proved to be true at the time. inevitably, the central bank always faces two risks. they are similar to statistical errors. one risk is that the bank might mistakenly tighten monetary policy when the economy is about to benefit from a marked improvement in productivity, and as a result suppress the growth potential of the economy. the other risk is that it allows the bubble to expand by wrongly interpreting the supposed improvement in productivity as real. when we make a policy decision, we should evaluate not only which one of these two risks has the greater probability of emerging, but also the socioeconomic cost of each. our experience of the bubble period seems to indicate that we did not fully recognize that the risk of wrongly interpreting a supposed productivity improvement could deliver such a serious blow to the sound development of the economy over the long run. what should have been done to calm the euphoric sentiment at that time and turn the focus of society to the potential risk facing the economy from a more long - term perspective? the important lesson from such a viewpoint is that we need to clearly state the objective of monetary policy, in other words, we need to substantiate the abstract concept of price stability. looking back at japan ’ s economy during the bubble period, cpi inflation had been stable until 1987, began to gradually rise in 1988, and recorded a year - on - year increase of about 1 % in march 1989, which was immediately before the introduction of the consumption tax. adjusted for the impact of the consumption tax, it continued to rise after april 1989, reached the 2 % level in april and the 3 % level in november 1990, and remained at that level until august 1991. since such a price hike considerably lagged the rise in asset prices and could not be regarded as particularly high compared with the figure before the bubble period, the threat of inflation did not constitute a valid argument in convincing the public that monetary conditions needed to be tightened