framework for enhancing flows of information between borrowers and lenders. they also provide guidance for productive engagements between them. these improvements should enable lenders to assess and price risks more precisely, enhance the stability of flows to developing and emerging market countries, and facilitate resolution of problems when they occur. these developments, especially the principles, would strengthen market discipline. borrowing countries would be encouraged to improve their institutions and adopt sound economic policies. as a result, we should see fewer international financial crises. in the unfortunate and hopefully rare event that problems do arise, a borrowing country and private lenders can negotiate orderly settlements, under the framework of cacs. the public sector, including the fund, would only be called on in the rarest cases, where the speed and magnitude of the problems might overwhelm efforts to formulate private solutions. what does this mean for the fund? in terms of giving out policy advice, the fund's role would be more relative. if private lenders become more important, borrowing countries would be inclined to listen to what the market wants. the fund is facing formidable competition, but i think it can build on its excellent reputation. i am especially looking forward to the efforts currently underway to enhance the fund's work related to financial issues. meanwhile, as i noted a moment ago, fund lending will be necessary only when there is a rapidly unfolding crisis of considerable magnitude. we should, therefore, consider if the current rules for releasing fund resources could appropriately cope with such a situation. in the jargon of the fund, this is a question of improving the rules for exceptional access. to say that the board is responsible for approving such lending is sidestepping the question. can the board form a consensus quickly enough? is the board representative enough so that members can subscribe comfortably to its decisions? who is going to be held accountable if something goes wrong? answering these questions will tax our imaginations to the fullest extent, but we must not dodge them. disasters do happen. recent developments in the japanese economy before closing my remarks, let me briefly speak on the japanese economy and the monetary policy of the bank of japan. 4 / 6 if we put aside quarter - to - quarter fluctuations in the rates of growth, the japanese economy has been on a recovery track for three and a half years, since the beginning of 2002. nevertheless, from the summer of 2004, we had a period of sluggish growth in exports and industrial production. this pause in growth

cram a few dozen bankers into one room and cut a deal, but we cannot do the same for bondholders. no wonder that emerging market and developing countries tapping the international financial market sometimes feel so insecure and helpless. the welcome rug could be pulled quickly from under their feet, as many of them found out in the late 1990s. they can turn to the fund for help, but private flows could even overwhelm the fund. fund quotas, essentially equivalent to paid - in capital, total about us $ 330 billion. this is only a fraction of global financial flows. in our recent efforts to reform the international monetary system, we have tried to deal with these changes. as i said a few minutes ago, the strategic review is an important milestone. nevertheless, the recommendations will soon be overtaken by developments in the international financial landscape. the three trends i mentioned in the first part of my talk - globalization, ict, and aging - - will continue. this means that capital movements between 3 / 6 economies will accelerate, broaden and expand. the fund must continue to evolve, if it is to remain relevant in tomorrow's international monetary system. though we cannot predict the exact consequences of the structural changes, a general idea of what we can expect seems to be clear enough. if private flows become increasingly important, we should emphasize private solutions as well as public interventions. there are two significant developments in this context. one is the collective action clauses ( cacs ) in bond covenants, advocated by the g - 10 countries in september 2002. now almost all new international bond issues are governed by cacs. in the near future, when bonds without cacs are all retired, cacs would govern the resolution of sovereign debt crises. a typical cac allows the terms of a bond issue to be changed with the consent of 75 % of bondholders. this means that if a country cannot pay its debts in full, it needs to come up with a restructuring plan that satisfies 75 % of the lenders. the clear and transparent rules also reduce the chances for holdouts or rogue investors to disrupt an orderly workout process. in turn, the market can more appropriately price the risks and costs of defaults. another notable development is the " principles for stable capital flows and fair debt restructuring in emerging markets, " released about a year ago. i know that managing director, charles dallara and his colleagues at the iif worked hard to see its publication. the principles offer a