The Ahistorical Federal Reserve: The most effective- and thus the most credible- monetary policy is one that reflects not only the lessons of history, but also a willingness to reconsider long-held assumptions.
Thus, I believe monetary policy to overcome deflation and supply-side reforms to raise the growth potential must be pursued in tandem, or"at the same time," to bring Japan's economy back on track toward sustained growth.
Monetary policy and regulations have combined like a failed chemistry experiment to create a potentially destructive force that should not exist outside of fiction.
The most effective- and thus the most credible- monetary policy is one that reflects not only the lessons of history, but also a willingness to reconsider long-held assumptions.
Meanwhile, the Bank of Japan's monetary policy aims at achieving the price stability target of 2 percent, and there are synergy effects between the efforts of various economic entities and the Bank's monetary policy.
Today, I will begin by focusing on the Bank's monetary policy and economic activity and prices in Japan and abroad. I will then touch briefly on the economy of Fukushima Prefecture in my closing remarks.
Unconventional monetary policy and cross-border capital flows First, the relationship between unconventional monetary policy and cross-border capital flows is quite complicated.
Unconventional Monetary Policy and Global Financial Markets Lastly, as already discussed in this symposium, let me touch on issues that relate to global liquidity and cross-border capital flows.
Many advanced countries, including Japan, have adopted independent monetary policy and free movement of capital, while in principle the foreign exchange rate is determined by the market mechanism.
Even if monetary policy and macroprudential policy are considered to be complementary to each other in the long run, depending on the economic phase, there may be cases in which asset prices surge under low inflation.
Recently, the cooperation between monetary and fiscal authorities increasingly has been drawing attention globally, so let me explain the basic thinking on it.
This is believed to be attributable to the inflation mechanism having become complex, which in turn has been affecting the relationship between monetary policy and prices, as I have touched upon earlier.
At this juncture, let me explain our thinking regarding the relationship between monetary policy and the exchange rate since it seems we have not been able to make it completely clear so far.
However, unlike in the case of fiscal and monetary policies, the government's policy role in terms of enhancing productivity is centered on creating an environment that facilitates private-sector initiatives to improve productivity.
I will talk later about the relation between monetary policy and exchange rates, but we intend to give utmost attention to the impact of the appreciation of the yen on economic developments.
In this context, the mechanisms that contribute to an increase in liquidity, and their relationship to monetary policy, to capital ratio regulations and risk management methods, to market structures, and so on, are still unclear.
Based on the experience I have gained from being in my current position, I would like to express my views on recent issues related to monetary policy and central banks' challenges in the face of a rapidly changing global economic environment.
Monetary Policy and Income Distribution I have long supported the view that distortion of income distribution is one of the side effects of the zero interest rate policy..
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