Speech

Acting Managing Director’s Opening Remarks at the 2019 Camdessus Lecture

July 22, 2019

As Prepared for Delivery

Excellencies, Honored Guests, Ladies and Gentlemen:

Welcome to you all on the occasion of the sixth Michel Camdessus Lecture—our signature lecture series on the role of central banks.

1. Library of Knowledge and Policies

I first met Haruhiko when I was a junior member of the IMF Japan team in October 1987, and Japan was booming. He was, if I recall correctly, heading the International Department at the Ministry of Finance at that time. Over the years, Haruhiko has taken on the tough economic challenges his country and Asia have faced, in good times and bad. How has he been able to be such a man for all seasons? I have come to see it begins with his unquenchable curiosity.

Takatoshi Ito —a former classmate of mine and one of Japan’s leading economists—once asked Haruhiko : “I hear that you read all the books in your high school library?” to which Haruhiko replied with his customary modesty: “No, no, that is not true”. But then he added: “I did read all the science books!”

His devotion to reading—and thirst for knowledge—is broader than science and economics, and includes novels, especially, the mysteries of Agatha Christie.

This love of learning is crucial to central banking, where one needs a constant search for deeper understanding of the issues, for new policies and new tools of the trade.

That spirit is important now, as many face similar challenges across the global economy.

2. Writing the Book on Monetary Policy

Let me say a bit more on this. With the momentum of recovery in advanced economies slowing this year, inflation below target in many countries, and medium-term prospects for growth and productivity modest, at best, monetary policy in most advanced economies is appropriately accommodative.

In some countries, monetary policy continues to be constrained by the zero-lower bound on interest rates, and that constraint could bind a broader group of economies in the next downturn.

More broadly, there are concerns that structural factors, including aging populations, may have pushed the equilibrium interest rate in normal times—the so called “natural rate”—well below historical levels.

So we live in an era where the book on monetary policy continues to be re-written, or at least updated, on a daily basis.

3. Taking the Lead in Drafting New Chapters

Of course, all serious students of central banking will have read and studied the book on Japan.

That is because Japan has been facing a combination of low growth, slumbering inflation, demographic pressures, and limited room for maneuver on monetary policy. Japan’s experience should interest us, as it may prove to be to some degree, a preview of coming attractions for others.

We have seen Japan become a policy pioneer, with resolve, creativity, and leadership. These are the very qualities that Haruhiko has shown throughout his career in government, in the development sector, and in central banking.

And he has done all that with inquisitiveness and analytic rigor. Long wanting to be a teacher, he did become a university professor in 2003. In one of his papers, he imagined how a Greek philosopher would analyze exchange rate management. That paper was titled: “ Socrates: The Dollar Dialogue.”

He prefers understatement over showmanship and chooses his words with academic precision. Perhaps this is why he is so effective.

He has been a tireless advocate for deeper economic integration in the Asia Pacific region. For example, while President of the Asian Development Bank, he was deeply involved in creating the Chiang Mai Initiative, the regional financial arrangement that contributed to a stronger global financial safety net.

More recently, as Governor of the Bank of Japan, Haruhiko took the lead in writing a new chapter on monetary policy by launching an ambitious program of quantitative and qualitative easing. Under his leadership, the BOJ lowered the short-term policy rate into negative territory, introduced a target for the long-term benchmark rates, and took several other key policy actions.

Since 2013, Japan’s real GDP has grown by around 5 percent cumulatively, after years of stagnation. And while significant challenges remain, deflationary forces appear to have receded.

Conclusion

Let me conclude by thanking Haruhiko for agreeing to share his wealth of knowledge, and for opening his library of experiences for us today.

I am deeply honored that you have accepted our invitation to deliver this sixth Michel Camdessus Lecture. And we look forward to hearing your thoughts on monetary policy and central banking in Japan.

I also look forward to engaging with you in a conversation about the major challenges facing today’s central banks, after your remarks.

The floor is yours!