We now have a hybrid arrangement in which some economies have flexible exchange rates, maintain open capital accounts, and pursue independent monetary policy – a sensible reconciliation of the so-called impossible trinity. But other countries heavily manage their exchange rates, with varying mixes of capital mobility and monetary policy independence.
As we all know, Japan’s economy is currently beset with a number of formidable problems. By resolving each of these problems steadily and patiently, I believe, prospects for the future of Japan’s economy will be improved. With such a vision in mind, today, I would like to talk about these problems and the steps the Bank has been taking to address them. 1.