Masazumi Wakatabe: Japan's economy and monetary policy

Speech (via webcast) by Mr Masazumi Wakatabe, Deputy Governor of the Bank of Japan, at a meeting with local leaders, Hiroshima, 1 September 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Good morning. It is my pleasure to have the opportunity today to exchange views with leaders in administrative, economic, and financial areas in Hiroshima Prefecture, although it is most regrettable that this meeting had to be held online due to the continuing impact of the novel coronavirus (COVID-19). First of all, I would like to offer my heartfelt sympathies to those who are suffering from the heavy rain that occurred in August. In addition, I would like to take this chance to express my sincere gratitude for your cooperation with the activities of the Bank of Japan's Hiroshima Branch. Today, September 1st, is the day the Hiroshima sub-branch was established in 1905. It is a great honor to hold this meeting on this anniversary.

Speaking of the anniversary, this year marks a century since the publication of Risk, Uncertainty and Profit by the American economist Frank H. Knight and A Treatise on Probability by the British economist John M. Keynes.1 Both of them make distinctions between risks, which can be measured by normal statistical probability, and "true," fundamental uncertainties, which cannot be explained by probability theory and thus are unmeasurable. They both emphasize the importance of true uncertainties in economic society. It seems that such uncertainties remain with regard to COVID-19 and its impact on the economy. In my speech today, while focusing on uncertainties, I will first outline the current situation of and outlook for Japan's economy, and then explain the challenges for central banks today, including the thinking behind central bank efforts to address climate change. Lastly, I will talk about recent and future economic activity in Hiroshima Prefecture.