futures market. growth for growth ’ s sake is not acceptable. can market forces sort this out? this is a question that the futures industry must ask itself, and i hope that the industry takes it seriously. bis central bankers ’ speeches in this regard, the fact that many commodity futures in japan are not flourishing might lead us to conclude that any market that fails to attract a sufficient amount of non - speculative activity will languish. the market might take care of the balance between speculative and non - speculative activities. in the case of financial futures, banks have legitimate hedging needs, and such activity will support a certain level of speculation in the market. meanwhile, the depressed levels of activity in financial futures for short - term instruments, in today ’ s ultra - low - interest - rate environment, might be consistent with the self - correcting forces of the markets. concluding remarks today, i have reflected on how far the industry, especially in japan, has progressed in meeting the challenges arising from the great financial crisis. i have also pointed out that the industry still needs to redefine its role in the post - crisis environment. in order to end my remarks on a positive note, i would like to quickly outline two opportunities for the industry. one is that there are still many risks for which the introduction of a traded market could be beneficial to the economy. an example is longevity risks. as i have stressed on numerous occasions, japan is facing acute challenges in terms of demography, which in turn weaken potential growth. a well - designed product that could deal with longevity risks could facilitate japan meeting those challenges. another opportunity is in terms of leveraging the advantages of the futures market structure. one feature that comes to my mind is the transparency of prices. there may be many areas in which prices determined on futures exchanges could become benchmarks for related economic activity. the recent attention over the setting of libor seems to confirm such a view. such positive contributions should confirm that the futures industry will continue to perform useful and indispensable functions within the society. we are now in a period of great changes. last night, we heard the remarks of the minister of state for financial services, mr. matsushita. he told us that japan had implemented and was planning to introduce many reforms that would enhance the competitiveness of and strengthen the confidence in the japanese financial markets. considering that a period of change is a period of opportunities, i believe that the industry could potentially accelerate its growth by

by this october. another significant risk - reducing measure is the shortening of the settlement cycle for jgbs. since this april, the settlement cycle of jgbs was shortened to t + 2 from t + 3, thereby reducing unsettled positions. market participants have also decided to begin laying the groundwork for shortening the settlement cycle further to t + 1. working together, authorities in japan and the industry are committed to enhancing the robustness and resiliency of the japanese market infrastructure, which should enable tokyo to thrive in the increasingly competitive quest to become a global financial center. before moving on to my second theme, let me add a few footnotes concerning financial market infrastructures. one is the tradeoff that arises from the increasing use of centralized clearing. centralized clearing has unambiguous advantages – for example, the mitigation of counterparty risk, better collateral management, increasing transparency, and enhanced market liquidity through standardization. these positive effects should augment the robustness and resiliency of market infrastructure. that is why the g20 has aimed for its wider adoption in view of the lessons of the great financial crisis. at the same time, centralized clearing has its own issues. it may increase, if not properly designed, moral hazard among market participants, who will be less concerned with counterparty risk. centralized clearing also concentrates risk in the clearing entity itself, which might become “ too big to fail. ” the bank of japan has always been aware of such a tradeoff and has continually stressed managing it wisely. this brings me to the second and third footnotes. methodology and disclosure framework, ” april 2012. the original text is available on the bis website. http : / / www. bis. org / publ / cpss101. htm. bis central bankers ’ speeches if the negative effects of centralized clearing are to be effectively managed, central banks and other regulators must strengthen the oversight and supervision of clearing entities. as we have already seen with the new basel banking rules, the move will inevitably result in higher contingency buffers at the clearing entity in the form of collateral or margining requirements, loss - absorption pools, or paid - in capital. since the users of centralized clearing, who are going to face less risk, will not have the incentive to increase the costs of clearing by committing more financial resources, higher buffers must be imposed by the authorities. this may increase the costs of trading, but that is a necessary