the scope of this approach. inflationlinked swaps, for example, allow the computation of an inflation curve similar to the yield curve, providing information on the expected path of inflation. market participants ’ beliefs will be reflected in investors ’ attitude towards risk. a widely regarded measure is the bank for international settlements ’ risk appetite indicator, which is derived from the differences between two distributions of returns : one implied by option prices, the other based on actual returns estimated from historical data. here, there is the question of finding an appropriate model and a fitting distribution. i shall return to the question of distributional assumptions in a few seconds. risk indicators may help us to determine, for example, whether historically low spreads on emerging market bonds at one period of time or low corporate bond spreads in another reflect market participants ’ increased willingness to take risks. taking risks without an appropriate premium, might endanger the ability of some entities to honour their obligations. this leads us directly to the field of financial stability which is a major concern for a central bank, both from a monetary and a real economy perspective. a stable financial system is of utmost importance for monetary policy, ensuring that monetary impulses have a reliable and predictable impact on the economy as a whole. 1 / 2 the various transmission channels in the financial sector are vital for the economy as a whole. a stable financial system is able to absorb financial or business cycle shocks even if and when they exceed the capacity of the individual market participants. on the other hand, major price shocks or a credit crunch could harm the economic allocation mechanism which may cause severe real losses in production and growth. moreover, the threat of crisis - driven excessive price movements on capital markets may push up risk premiums to very high levels. and this may further disturb the allocation mechanism. with regard to professor mandelbrot ’ s achievements in the analysis of financial markets, let me now comment a little further on the close relationship between risk models for the analysis of financial stability and the distributional assumptions for financial data. the crucial question is : which distributions fit financial data? since the work of bachelier in 1900, the normality assumption seems to have been the dominant assumption for the last century, and that is still the case today, at least for many practitioners. but, in the early 1960s professor mandelbrot observed the behaviour of changes of speculative prices, which is much more erratic than the normality assumption would imply. in 1963, professor mandelbrot wrote in the journal

this is the story of a poor craftsman, kazo ( named maebara kozan afterward ), who lived in the uwajima clan at the end of the edo period, passionately taking in knowledge from overseas and succeeding in building a steamship only five years and seven months after the arrival of commodore perry's black ships. kazo was so talented that the founder of japan's modern army, murata zoroku ( named omura masujiro afterward ), who worked with kazo to build the steamship, is said to have mentioned that he could be a professor at a university if he lived in europe. i think kazo's life is a guide for the path that japan should take toward achieving economic growth - - that is, incorporating knowledge and coping with globalization. thank you very much for your kind attention. japan's economy and monetary policy speech at a meeting with business leaders in ehime february 5, 2020 wakatabe masazumi deputy governor of the bank of japan chart 1 i. financial and economic developments global growth rate y / y % chg. 6. 0 5. 5 5. 0 2021 : + 3. 4 % 4. 5 2020 : + 3. 3 % 4. 0 3. 5 3. 0 2. 5 2. 0 2019 : + 2. 9 % average from 1980 through 2018 : + 3. 5 % 1. 5 1. 0 0. 5 0. 0 - 0. 5 cy 00 note : figures for 2020 and 2021 are the imf's projections as of january 2020. source : imf. chart 2 i. financial and economic developments global decoupling between the manufacturing and nonmanufacturing sectors nonmanufacturing sector manufacturing sector heightening uncertainties ( u. s. - china trade friction ) ・ postponement of business fixed investment ・ decline in trade volume adjustments in the cycle for it - related goods strengthened macroeconomic measures rapid deceleration progress in u. s. - china trade talks and brexit accommodative financial conditions " decoupling " steady consumer sentiment tight labor market conditions steady developments pick - up in the it - related sector pick - up in the global economy pick - up in the manufacturing sector chart 3 i. financial and economic developments developments in the global manufacturing sector s. a., di global business sentiment in the manufacturing sector world semiconductor shipments s. a., q / q % chg. - 5 cy12 notes