Annual Review 2022

• Contents
• Request for Comments
• Notice

August 31, 2022
Bank of Japan

Contents

The full text of the report is available in the PDF version. The HTML version does not include the sections marked with asterisks (*).

• Foreword by the Governor PDF Version [PDF 83KB]
• About the Bank of Japan PDF Version [PDF 1,821KB]
  • I. Core Purposes
  • II. Capital
  • III. The Bank's Officers
  • IV. Organization
• The Bank's Business Operations PDF Version [PDF 898KB]
  • I. Monetary Policy
  • II. Financial System Policy
  • III. Enhancement of Payment and Settlement Systems and Market Infrastructures
  • IV. International Operations
  • V. Issuance, Circulation, and Maintenance of Banknotes
  • VI. Services Relating to the Government
  • VII. Communication with the Public
• The Bank's Review of Fiscal 2021 PDF Version [PDF 1,029KB]
  • I. Introduction
  • II. Review of Economic and Financial Developments and Monetary Policy Meetings
  • III. Performance Reviews of Measures Taken under the Medium-Term Strategic Plan
• The Bank's Organizational Management in Fiscal 2021 PDF Version [PDF 334KB]
  • I. Statement of Accounts and Budget for Expenses
  • II. IT Investment
  • III. Human Resources
  • IV. Organizational Management Measures
  • V. Internal Audits
• Climate Change Initiatives: Disclosure Based on TCFD Recommendations PDF Version [PDF 257KB]
  • I. Governance
  • II. Strategy
  • III. Risk Management
  • IV. Metrics and Targets
• The Bank's Accounts: Financial Statements and Other Documents for Fiscal 2021* PDF Version [PDF 1,519KB]
  • I. Assets and Liabilities, Profits and Losses, and Capital Adequacy Ratio
  • II. Financial Statements
  • III. Schedule for the Financial Statements
  • IV. Expenses
• Appendixes PDF Version [PDF 1,063KB]
  • Appendix 1: Overview of Audits of the Bank of Japan*
  • Appendix 2: Medium-Term Strategic Plan (Fiscal 2019-2023)
    • Attachment 1 for Appendix 2: The Bank of Japan's Budget for Expenses for Fiscal 2022*
    • Attachment 2 for Appendix 2: The Ceiling on the Number of Full-Time Employees of the Bank of Japan for Fiscal 2022*
  • Appendix 3: Interim Review of Medium-Term Strategic Plan (Fiscal 2019-2023)
• Information PDF Version [PDF 615KB]
  • I. Bank of Japan Website
  • II. Visiting the Bank of Japan
  • III. Publications and Reports

Foreword by the Governor

About the Bank of Japan

The Bank of Japan is the central bank of Japan. It is a juridical person established based on the Bank of Japan Act (hereafter the Act), and is not a government agency or a private corporation (Table 1).

I. Core Purposes

The Act determines the Bank's core purposes as follows:

Article 1

1. (1) The purpose of the Bank of Japan, or the central bank of Japan, is to issue banknotes and to carry out currency and monetary control.
2. (2) In addition to what is prescribed in the preceding paragraph, the Bank of Japan's purpose is to ensure smooth settlement of funds among banks and other financial institutions, thereby contributing to the maintenance of stability of the financial system.

The Act also stipulates the principle governing the Bank's currency and monetary control as follows:

Article 2

Currency and monetary control by the Bank of Japan shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy.

II. Capital

The Bank is capitalized at 100 million yen in accordance with Article 8, paragraph 1 of the Act. As of the end of March 2022, 55,008,000 yen is subscribed by the government, and the rest by the private sector (Table 2).¹

The Act does not grant holders of subscription certificates the right to participate in the Bank's management, and, in the case of liquidation, only gives them the right to request distribution of residual assets up to the sum of the paid-up capital and, if any, the special reserve fund.² Dividend payments as a proportion of paid-up capital are limited to 5 percent or below in each fiscal year.³

Notes:

• 1.Article 8, paragraph 2 of the Act states as follows: "Of the amount of stated capital set forth in the preceding paragraph, the amount of contribution by the government shall be no less than fifty-five million yen."
• 2.Stipulated by Article 60, paragraph 2, and Supplementary Provisions Article 22, paragraph 2.
• 3.Stipulated by Article 53, paragraph 4.

Note:

• 1.Rounded down to the nearest 1,000 yen. As of the end of March 2022.

III. The Bank's Officers

The Bank's officers are the Governor, Deputy Governors, Members of the Policy Board, Auditors, Executive Directors, and Counsellors.⁴ Of the above, the Governor, Deputy Governors, and Members of the Policy Board make up the Policy Board.⁵

The Governor, Deputy Governors, and Members of the Policy Board are appointed by the Cabinet, subject to the consent of the House of Representatives and the House of Councillors. Auditors are appointed by the Cabinet. Executive Directors and Counsellors are appointed by the Minister of Finance based on the Policy Board's recommendation.⁶

The terms of office are five years for the Governor, Deputy Governors, and Members of the Policy Board; four years for Auditors and Executive Directors; and two years for Counsellors.⁷ The Bank's officers, excluding Executive Directors, are not dismissed against their will during their terms of office, except in the cases prescribed in the Act, such as the formal commencement of bankruptcy proceedings against them.⁸

For duties and powers of the Bank's officers, see Table 3.⁹

Notes:

• 4.Stipulated by Article 21. The officers of the Bank consist of a Governor, two Deputy Governors, six Members of the Policy Board, three or fewer Auditors, six or fewer Executive Directors, and a small number of Counsellors.
• 5.Stipulated by Article 16, paragraph 2.
• 6.Stipulated by Article 23.
• 7.Stipulated by Article 24.
• 8.Stipulated by Article 25.
• 9.Duties and powers are stipulated by Article 16, paragraph 2, and Article 22.

Policy Board Members^1,2

Standing from left to right: TAKATA Hajime, NOGUCHI Asahi, ADACHI Seiji, NAKAMURA Toyoaki, NAKAGAWA Junko, and TAMURA Naoki
Seated from left to right: AMAMIYA Masayoshi, KURODA Haruhiko, and WAKATABE Masazumi

Notes:

• 1.Members are as of August 1, 2022.
• 2.The texts of speeches by Policy Board members are available on the "Speeches by speaker" page on the Bank's website.

IV. Organization

Organization Chart of the Bank¹

Notes:

• 1.As of August 1, 2022.
• 2.As stipulated by Article 16, paragraph 2 of the Act, the Policy Board shall consist of the Governor, two Deputy Governors, and six Members of the Policy Board.
• 3.Local offices include the Computer Center represented by the Director-General of the Information System Services Department, and the Banknote Operations Center represented by the Director-General of the Currency Issue Department.

Functions of Committees/Departments/Offices

Committees and Head Office Departments

Management Committee
Examines and manages Bank-wide issues regarding the Bank's operations. The committee comprises the Deputy Governors and all Executive Directors.

Compliance Committee
Ensures that the officers and employees perform their duties fairly and in compliance with the relevant laws and regulations. The committee comprises members appointed from among the Deputy Governors and Executive Directors by the Governor, the Director-General of the Internal Auditors' Office, and one or more legal experts from outside the Bank.

Secretariat of the Policy Board
(1) Arranges proceedings for Policy Board meetings, (2) liaises with the Diet and the media, (3) reviews the content and wording of important documents, and offers a legal perspective on them, (4) plans and formulates measures relating to the Bank's business operations and organizational management, (5) handles the Bank's budget, settlement, and accounting, (6) provides administrative services for the Bank's officers, and (7) supports Auditors in auditing.

Internal Auditors' Office
Audits the Bank's business operations.

Monetary Affairs Department
Plans and formulates monetary policy measures.

Financial System and Bank Examination Department
(1) Plans and formulates measures that contribute to the maintenance of an orderly financial system, (2) conducts on-site examinations and off-site monitoring of financial institutions that hold current accounts at the Bank, (3) judges financial institutions' eligibility to hold current accounts at the Bank and to have access to its lending facilities, and (4) determines the specifics of credit extension and discounting of bills by the Bank.

Payment and Settlement Systems Department
Plans and formulates measures in the following areas: (1) policy issues relating to payment and settlement systems; (2) financial institutions' access to payment and settlement services provided by the Bank; and (3) the Bank's business continuity planning.

Financial Markets Department
(1) Determines the specifics of daily market operations, (2) conducts foreign exchange interventions, (3) works toward improving the functioning of Japanese financial markets, including the foreign exchange market, and (4) monitors and analyzes developments in financial markets in Japan as well as overseas, including foreign exchange markets.

Research and Statistics Department
(1) Conducts research on the domestic economy and fiscal situation, and (2) compiles and releases statistics.

International Department
(1) Liaises and coordinates with overseas central banks and international organizations, (2) makes arrangements for investment in yen assets by overseas central banks, and conducts operations aimed at providing international financial support, (3) manages foreign currency assets held by the Bank, (4) conducts research on global economic and financial conditions, and (5) compiles Japan's balance of payments and other such statistics.

Currency Issue Department
(1) Conducts planning and operations relating to banknotes, and (2) conducts payment/receipt of coins, and examines and takes custody of them.

Operations Department
Conducts banking operations including the following: (1) discounting of bills; (2) credit extension; (3) purchasing/selling of bills, Japanese government securities, and other securities; (4) borrowing/lending of securities with cash collateral; (5) accepting of deposits; (6) domestic funds transfers; (7) handling of treasury funds; and (8) operations relating to stocks purchased by the Bank.

Information System Services Department
Manages the development and operation of the Bank's computer systems.

Public Relations Department
(1) Conducts public relations activities, (2) administers the Bank's library, and (3) works toward raising public awareness and understanding of financial and economic issues.

Personnel and Corporate Affairs Department
Handles business in corporate affairs, personnel policy issues relating to recruitment, assessment of job performance, career planning and training, wages and salaries, and the Bank's code of ethics.

Administration Department
Conducts administrative operations relating to the Bank's facilities, supplies, security, and transportation.

Institute for Monetary and Economic Studies
(1) Studies theoretical, institutional, technological, and historical aspects of monetary and economic issues, (2) collects, preserves, and exhibits historical materials and documents related to monetary and economic issues, and (3) exchanges views with academics.

Branches and Offices

Branches
The 32 branches mainly conduct operations relating to currency issue and banking operations, and research on the economic and financial situation in their respective areas.

Local Offices in Japan
The Computer Center in Fuchu City, Tokyo, operates the Bank's systems. The Banknote Operations Center in Toda City, Saitama Prefecture, receives, pays, and stores banknotes. The other 12 local offices handle some of the operations of the Head Office or branches.

Overseas Representative Offices
The seven overseas representative offices perform a liaison function, gather information, and conduct research.

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• Back to CONTENTS

The Bank's Business Operations

I. Monetary Policy

The Bank of Japan decides and implements monetary policy under the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI), with the aim of achieving price stability and thereby contributing to the sound development of the national economy, as stipulated in Article 2 of the Bank of Japan Act (hereafter the Act). Monetary policy is decided by the Policy Board at Monetary Policy Meetings (MPMs), and market operations (the Bank's day-to-day provision and absorption of funds in the market) are carried out based on the guideline decided at each MPM. The Bank held eight MPMs in fiscal 2021.

The Bank releases each quarter the Outlook for Economic Activity and Prices (hereafter the Outlook Report) after the Policy Board has decided the text of "The Bank's View" section at MPMs held, in principle, in January, April, July, and October. In the Outlook Report, the Bank presents its outlook for developments in economic activity and prices, assesses upside and downside risks, and outlines its views on the future conduct of monetary policy. For MPMs other than the above, the Policy Board members' assessment of the economic and financial situation is expressed in the statement on monetary policy released after each MPM.

In order to make appropriate policy decisions, the Bank conducts research and analysis on economic and financial developments at home and abroad. Major findings are reflected in the Bank's releases including the Outlook Report and the Regional Economic Report. The Bank also conducts fundamental studies on economic and financial issues; it publishes the major findings in the Bank of Japan Working Paper Series, the Bank of Japan Research Laboratory Series, and in research papers released by the Institute for Monetary and Economic Studies (IMES), specifically in the Monetary and Economic Studies and the IMES Discussion Paper Series.¹

The Bank, pursuant to Article 54, paragraph 1 of the Act, prepares the Semiannual Report on Currency and Monetary Control approximately every six months, covering matters related to the conduct of monetary policy (those listed in the items of Article 15, paragraph 1 of the Act) and business operations that the Bank has conducted based thereon, and submits it to the Diet through the Minister of Finance. In the most recent two issues of this report, the Bank explains in detail economic and financial developments as well as the Bank's conduct of monetary policy and market operations during fiscal 2021.²

Notes:

• 1.Papers and statistics as well as lists of the Bank's publications in English are available on the Bank's website and on the IMES website; for the list of the Bank's major publications and reports, see III. Publications and Reports under Information.
• 2.The summaries of these two issues are available in English on the Bank's website; for excerpts from these summaries, see II. Review of Economic and Financial Developments and Monetary Policy Meetings under The Bank's Review of Fiscal 2021. The full texts are available in Japanese on the Bank's website.

II. Financial System Policy

One of the core purposes of the Bank, as stipulated in Article 1, paragraph 2 of the Act, is to ensure smooth settlement of funds among banks and other financial institutions, thereby contributing to the maintenance of financial system stability. To this end, the Bank provides safe and convenient settlement assets in the form of deposits in current accounts that financial institutions hold at the Bank, and takes measures to enhance the safety and efficiency of payment and settlement systems. In order to ensure financial system stability, the Bank also takes various measures to make sure that a financial institution's inability to complete settlement of a transaction does not result in a chain of settlement failures at other institutions and thus disrupt the overall functioning of the financial system.

Specifically, the Bank may provide financial institutions suffering a shortage of liquidity with the following: (1) loans against collateral in the form of securities, pursuant to Article 33; and/or (2) other forms of liquidity, in its role as the lender of last resort, pursuant to Articles 37 and 38 of the Act.

In order to be ready to act effectively as the lender of last resort, the Bank strives to gain an accurate grasp of business conditions at financial institutions and to encourage the maintenance of sound financial conditions, offering guidance and advice as necessary, through the conduct of on-site examinations (examinations that the Bank carries out by visiting the premises of financial institutions pursuant to Article 44 of the Act) as well as off-site monitoring (monitoring that is conducted through meetings with executives and staff of financial institutions, as well as through analysis of various documents submitted by these institutions) (Tables 1 and 2). In addition, through activities such as seminars and workshops organized by the Bank's Center for Advanced Financial Technology (CAFT), the Bank encourages financial institutions' efforts to raise the sophistication of their business and risk management as well as of their business operations.

The Bank conducts research and analysis assessing risks in the financial system as a whole, i.e., taking a macroprudential perspective, by making use of insights obtained through its on-site examinations and off-site monitoring and paying due attention to the interconnectedness of the real economy, financial markets, and the behavior of financial institutions. The findings of this research and analysis are published in various forms, for example, the Financial System Report, and the Bank draws on these when taking part in initiatives with relevant parties to ensure the stability of the financial system. These findings are also made use of in developing and implementing policy. The Bank has also been participating in international initiatives to maintain the stability of the global financial system. These include discussions held by the Basel Committee on Banking Supervision, which comprises central banks and supervisory authorities from major economies.

The Bank, as and when necessary, conducts business requisite to maintaining financial system stability, including the provision of loans, pursuant to Article 38 of the Act (hereafter the term "special loans" covers all such business). The Bank decides on the extension of special loans based on the following four principles, taking into account the nature and purpose of the lender-of-last-resort function:
Principle 1
There must be a strong likelihood that systemic risk will materialize.
Principle 2
There must be no alternative to the provision of central bank money.
Principle 3
All relevant parties are required to take clear responsibility to avoid moral hazard.
Principle 4
The financial soundness of the Bank of Japan itself must not be impaired.

Note:

• 1.Figures in parentheses indicate the number of institutions as of the end of fiscal 2020.

Notes:

• 1.During fiscal 2020, the Bank conducted "remote intensive interviews" (in-depth interviews using remote methods), in place of on-site examinations.
• 2.Established and licensed under Japanese legislation, excluding the Bank and government-related organizations.
• 3.Including financial instruments business operators and Japanese branches of foreign banks.

III. Enhancement of Payment and Settlement Systems and Market Infrastructures

The Bank provides safe and convenient settlement assets in the form of banknotes and deposits in current accounts that financial institutions hold at the Bank. In addition, the Bank conducts settlement for Japanese government securities (JGSs) in its role as the book-entry transfer institution in the Japanese government bond (JGB) Book-Entry System. To ensure the safety and efficiency of these services, the Bank operates a computer network system for the settlement of funds and JGSs, the Bank of Japan Financial Network System (BOJ-NET).

The Bank conducts oversight of payment and settlement systems, monitoring their safety and efficiency and inducing improvements where necessary. Moreover, the Bank participates with other central banks in various international discussions and initiatives related to payment and settlement systems, including those of the Committee on Payments and Market Infrastructures (CPMI) at the Bank for International Settlements (BIS).

In addition, in order to strengthen and improve the efficiency of the functioning of markets as well as to support more robust risk management and innovation in financial services and market transactions, the Bank, with an eye on international developments, takes initiatives to reinforce the infrastructures of financial and capital markets. Specifically, it exchanges views with market participants, supports the formulation of additional rules on and revisions of market practices, and compiles and releases statistics on market transactions. As part of its initiatives, the Bank has continued to enhance its business continuity arrangements in preparation for times of disaster or other emergency, and has provided active support to market participants in developing effective business continuity planning (BCP) in financial markets, payment and settlement systems, and the financial system.

In order to effectively implement measures to enhance payment and settlement systems and market infrastructures, the Bank conducts research and analysis on the safety and efficiency of payment and settlement systems as well as on the financial system and financial markets, in addition to fundamental research on related issues. With regard to central bank digital currencies (CBDCs), a new form of digital central bank money that is different from the deposits in current accounts that financial institutions hold at the Bank, although the Bank currently has no plan to issue a CBDC, it has been conducting the explorations necessary to be able to respond appropriately to changes in circumstances, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems.

IV. International Operations

The Bank conducts operations in the field of international finance, such as foreign exchange transactions, including those executed as part of the Bank's management of its foreign currency assets, as well as business related to assisting other central banks and international organizations in their investment in yen. The Bank also handles government affairs that relate to international finance, such as the compilation and dissemination of Japan's balance of payments (BOP) statistics and foreign exchange intervention.

In addition, the Bank takes part in international discussions on the state of the world economy, measures to ensure the stability and improve the structure of financial markets, and responses to climate change. The Bank participates in various forums, such as meetings of the Group of Twenty (G20), the Group of Seven (G7), the International Monetary Fund (IMF), the BIS, the Financial Stability Board (FSB), and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), as well as other meetings of monetary authorities including central banks in Asia.

With regard to Asia, the Bank engages in various activities including the following: the promotion of monetary cooperation, mainly through participation in the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP) and the Association of Southeast Asian Nations Plus Three (ASEAN Plus Three); the strengthening of technical cooperation and staff training in support of efforts to ensure economic and financial stability in Asia; and the conduct of research on the region.

V. Issuance, Circulation, and Maintenance of Banknotes

The Bank, as the country's sole issuer of banknotes (Bank of Japan notes), ensures the stability of banknote supply and maintains public confidence in banknotes through the conduct of the following operations at its Head Office and branches in Japan. First, the Bank receives banknotes from and pays banknotes to financial institutions that hold current accounts at the Bank (BOJ account holders). Second, the Bank counts the banknotes it receives from BOJ account holders, examines them to verify their authenticity, and checks their fitness for recirculation. As for coins, they are delivered to the Bank by the government, which is the authorized issuer of coins, and then put into circulation.

As part of its measures to secure confidence in banknotes and coins, the Bank works to maintain the cleanliness of banknotes in circulation by preventing damaged or worn banknotes from being returned to circulation. In addition, the Bank remains active in advancing research and promoting public understanding regarding counterfeit deterrence and the smooth circulation of currency, in cooperation with relevant institutions at home and abroad, including other central banks.

VI. Services Relating to the Government

The Bank provides various services relating to the government, such as treasury funds and JGS services. Specifically, these are (1) receipt, disbursement, and accounting of treasury funds (the Bank classifies receipts and disbursements of treasury funds by the specific government account as well as by the individual government agency); (2) management of the deposits of the Japanese government; (3) custody of securities acquired by or submitted to the government; (4) issuance of, and principal and interest payment on, JGSs; and (5) operations relating to its role as the book-entry transfer institution in the JGB Book-Entry System. For the convenience of the public, the Bank designates certain branches and offices of financial institutions throughout the country as its agents and entrusts them with some of the services relating to treasury funds and JGSs.

Besides the above operations, the Bank engages in various transactions with the government, such as purchasing and selling of JGSs.

VII. Communication with the Public

With a view to satisfying the requirements of public accountability, the Bank releases in a timely manner a document that contains a summary of the opinions presented at each MPM (Summary of Opinions), the minutes of MPMs, and public statements on most of the Policy Board decisions. The Bank actively provides information through a variety of channels including the following: reporting to and attendance at the Diet; press conferences held and speeches delivered by the Bank's officers; and the Bank's website. Transcripts of MPMs held more than 10 years previously are also released.

To promote a better understanding of the policies and business operations of the Bank, not only in the eyes of financial professionals but also of the general public, the Bank endeavors to tailor its publications and releases to the diverse needs and interests of their users. It also works to promote financial literacy among the public.

The Bank compiles and releases various statistics to be widely shared with the public and takes steps to refine its statistics to improve their user-friendliness.

Meanwhile, the Bank discloses information in accordance with the Act on Access to Information Held by Independent Administrative Agencies.

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• Back to CONTENTS

The Bank's Review of Fiscal 2021

I. Introduction

In March 2019, the Bank of Japan formulated and released the Medium-Term Strategic Plan (Fiscal 2019-2023) (hereafter the Plan).¹ The Plan's content will remain, in principle, fixed during the five-year period, with a view to clarifying the Bank's objectives over the medium term and to ensuring proper assessment of its performance. The Bank conducts and makes public performance reviews of measures taken under the Plan every fiscal year.

This section provides a brief review of economic and financial developments as well as decisions made at Monetary Policy Meetings (MPMs) in fiscal 2021, followed by performance reviews of measures taken under the Plan. Each performance review is divided into two parts: a description of progress in implementing specific measures during fiscal 2021 for each of the strategic objectives for its business operations laid out in the Plan, and the Bank's evaluation of that progress. The Bank's performance with regard to the strategic objectives for its organizational management is described in "The Bank's Organizational Management in Fiscal 2021."

The Plan states that, in order to enable the Bank to address any changes in the environment, it shall conduct an interim review of the Plan in or around fiscal 2021 and shall flexibly revise the Plan as appropriate in response to any significant changes. A comprehensive review of its performance over the entire period of the Plan shall be conducted separately.

The Bank conducted its interim review of the Plan in March 2022.² It examined its accomplishments in the first three fiscal years of the Plan and clarified its strategy for the remaining period, particularly for the main challenges faced in conducting business operations and organizational management since the formulation of the Plan. The Bank positions the interim review as a complement to the Plan for the remaining period, namely, for fiscal 2022 and 2023.

Notes:

• 1.For the text of the "Medium-Term Strategic Plan (Fiscal 2019-2023)," see Appendix 2.
• 2.For the text of the "Interim Review of Medium-Term Strategic Plan (Fiscal 2019-2023)," see Appendix 3.

II. Review of Economic and Financial Developments and Monetary Policy Meetings³

A. First Half of Fiscal 2021 (April-September 2021)

1. Economic developments

1. a. During the period from April through September 2021, Japan's economy continued to pick up as a trend, although it remained in a severe situation due to the impact of the novel coronavirus (COVID-19) at home and abroad.

   Exports and industrial production continued to increase as a trend, despite being weak in the second half of the April-September period due to the effects of supply-side constraints seen in some areas. Corporate profits and business sentiment continued to improve on the whole. Business fixed investment kept picking up, although weakness had been seen in some industries. The employment and income situation remained weak due to the impact of COVID-19. Private consumption remained stagnant due to continuing strong downward pressure on consumption of services, such as eating and drinking as well as accommodations. Housing investment had turned to a pick-up. Meanwhile, public investment had been more or less flat.

2. b. Regarding price developments, the year-on-year rate of decline in the consumer price index (CPI, all items less fresh food), amid the impact of COVID-19, accelerated somewhat significantly for April due to the effects of a reduction in mobile phone charges, and then continued to decelerate, mainly reflecting a rise in energy prices. At the end of the April-September period, the year-on-year rate of change in the CPI was at around 0 percent. Inflation expectations were more or less unchanged and thereafter turned to a pick-up.

2. Developments in financial markets and conditions

1. a. In global financial markets, prices of risky assets generally had followed an uptrend in advanced economies due to progress with the resumption of economic activity. On the other hand, stock prices in emerging economies had declined since summer, mainly reflecting the strengthening of various controls in China and concern over debt repayment by a major Chinese real estate firm. U.S. and European long-term interest rates had followed a declining trend through the first half of the April-September period but thereafter turned to an increase.

2. b. Turning to domestic financial markets, money market rates had been at low levels on the whole.

   With regard to developments in the bond market, the long-term interest rate had been stable at the target level of around zero percent under Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control. Issuance rates for CP and corporate bonds had been at extremely low levels.

   The Nikkei 225 Stock Average had been sluggish until late August. Thereafter, while the number of confirmed new cases of COVID-19 turned to a decline, it rose, mainly reflecting the correction of Japanese stock prices, which had been undervalued relative to those in the United States and Europe. The Nikkei Stock Average was at around 29,500 yen at the end of September.

   In the foreign exchange market, the yen had been more or less flat against the U.S. dollar, and was at the 111 yen level at the end of September. The yen had been more or less flat against the euro on the whole during the April-September period.

3. c. With regard to corporate financing, demand for funds that stemmed mainly from a rise in precautionary demand due to the impact of COVID-19 had subsided on the whole, as evidenced by large firms repaying loans by compressing their increased funds on hand. In this situation, although firms' financial positions had improved on the whole, mainly on the back of a pick-up in economic activity, weakness remained, particularly for firms in industries facing subdued sales due to the impact of COVID-19, as well as small and medium-sized ones. Meanwhile, in terms of supply of funds, financial institutions' lending attitudes as perceived by firms remained accommodative.

4. d. The year-on-year rates of increase in both the monetary base (currency in circulation plus current account balances at the Bank) and money stock (M2) had decelerated relative to somewhat high growth last year; in September, the rate of increase in the monetary base was in the range of 10-15 percent and that in monetary stock was in the range of 4.0-4.5 percent.

3. MPMs⁴

1. a. Four MPMs were held in the first half of fiscal 2021.

   The Policy Board made the following judgement on economic and financial developments at all the MPMs held during the period: "Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad."

2. b. In the conduct of monetary policy, the Policy Board decided at all the MPMs held in the first half of fiscal 2021 to maintain the following guideline for market operations under QQE with Yield Curve Control.

   1. 1. Yield curve control

         The Bank decided to set the following guideline for market operations for the intermeeting period.

         The short-term policy interest rate:
         The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank.

         The long-term interest rate:
         The Bank will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

      With regard to asset purchases, the Policy Board decided at the April MPM to maintain the following guidelines.

   2. 1. Guidelines for asset purchases

         With regard to asset purchases other than JGB purchases, the Bank decided to set the following guidelines.

         1. (a) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding.

         2. (b) The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of September 2021.

      At the June MPM, the Policy Board extended the duration of the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19), as described later. It also decided upon the following guidelines for asset purchases.

   3. 1. Guidelines for asset purchases

         With regard to asset purchases other than JGB purchases, the Bank decided to set the following guidelines.

         1. (a) The Bank will purchase ETFs and J-REITs as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding.

         2. (b) The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of March 2022.

      At all the subsequent MPMs, the Policy Board maintained the above guidelines for asset purchases.

      At the June MPM, the Policy Board decided to extend the duration of the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19) by 6 months until the end of March 2022 with a view to continuing to support financing, mainly of firms, given that such financing was likely to remain under stress due to the impact of COVID-19, although it had improved compared with a while ago.

      With regard to the future conduct of monetary policy, the Policy Board confirmed the following at all the MPMs held in the first half of fiscal 2021: "the Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. The Bank will continue to support financing mainly of firms and maintain stability in financial markets through (1) the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19), (2) an ample provision of yen and foreign currency funds without setting upper limits mainly by purchasing JGBs and conducting the U.S. dollar funds-supplying operations, and (3) purchases of ETFs and J-REITs with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding. For the time being, the Bank will closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels."

      Regarding actions to address climate change, the Policy Board made the following statement at the June MPM.

      Climate change issues could exert an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium- to long-term perspective. The Bank considers that supporting the private sector's efforts on the issues from a central bank's standpoint will contribute to stabilizing the macroeconomy in the long run. In taking actions from the monetary policy side, the Bank deems it important to give consideration to market neutrality. Against this background, in order to support private financial institutions' various efforts in the field related to climate change, the Bank judged it appropriate to introduce a new fund-provisioning measure, through which it provides funds to financial institutions for investment or loans that they make to address climate change issues based on their own decisions. This new measure will be a successor to the Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth. Although loan disbursement under the existing measure will continue to be made through June 2022 as scheduled, the Bank will launch the new measure likely within 2021. It will make public the preliminary outline of the measure at the next July MPM.

      At the July MPM, the Policy Board decided on the preliminary outline of the new fund-provisioning measure to support private financial institutions' various efforts in fields related to climate change, a measure which was announced at the June MPM to be introduced. At the September MPM, the Policy Board decided on the details of the Funds-Supplying Operations to Support Financing for Climate Change Responses (Climate Response Financing Operations), of which the preliminary outline was made public at the July MPM.

B. Second Half of Fiscal 2021 (October 2021-March 2022)

1. Economic developments

1. a. During the period from October 2021 through March 2022, Japan's economy continued to pick up as a trend, despite being affected by COVID-19 and other factors. A pick-up in the economy had temporarily become evident in the first half of the October-March period, with the number of confirmed new cases of COVID-19 being contained. Thereafter, however, some weakness had been seen in part, mainly reflecting a resurgence of COVID-19 and a rise in commodity prices.

   Exports and industrial production continued to increase as a trend, despite the remaining effects of supply-side constraints. Corporate profits continued to improve on the whole, but business sentiment had seen a pause in its improvement in the second half of the October-March period, mainly due to the impact of COVID-19 and the rise in commodity prices. Business fixed investment kept picking up, although weakness had been seen in some industries. The employment and income situation remained relatively weak on the whole, although improvement had been seen in some parts. In the first half of the October-March period, a pick-up in private consumption had become evident, with downward pressure stemming from COVID-19, particularly on services consumption, waning. Thereafter, however, the pick-up had paused due to the impact of the resurgence of COVID-19. Housing investment had been more or less flat. Public investment had been relatively weak, albeit at a high level.

2. b. Regarding price developments, the year-on-year rate of change in the CPI (all items less fresh food), despite continuing to be affected by a reduction in mobile phone charges, had increased in positive territory, reflecting price rises in energy and other items, and had been in the range of 0.5-1.0 percent at the end of the October-March period. Inflation expectations, particularly short-term ones, had risen.

2. Developments in financial markets and conditions

1. a. In global financial markets, amid concern over acceleration in the pace of reduction in monetary accommodation in advanced economies, long-term interest rates had risen significantly. Risk asset prices had been firm through the end of 2021. Since the turn of the year, however, as long-term interest rates had increased significantly, they generally had declined, with considerable fluctuations due to uncertainties over the situation surrounding Ukraine. Meanwhile, international commodity prices had risen substantially, reflecting factors such as improvement in the outlook for global demand and concern over supply declines associated with geopolitical risks.

2. b. Turning to domestic financial markets, money market rates had been at low levels on the whole.

   With regard to developments in the bond market, 10-year JGB yields had been stable at the target level of around zero percent under QQE with Yield Curve Control. Issuance rates for CP and corporate bonds had been at extremely low levels.

   The Nikkei 225 Stock Average had been firm until early January, mainly on the back of favorable financial results. Thereafter, reflecting rises in U.S. and European interest rates and heightened uncertainties over factors such as the situation surrounding Ukraine, it had fluctuated significantly, as seen in relatively large declines when investors' sentiment deteriorated globally. The Nikkei Stock Average was in the range of 27,500-28,000 yen at the end of March.

   In the foreign exchange market, the yen had depreciated against the U.S. dollar, mainly due to a widening of the yield differential between Japan and the United States and dollar purchasing by Japanese importers given factors such as the rise in commodity prices. The U.S. dollar was in the range of 121-122 yen at the end of March. The yen had also depreciated against the euro on the whole during the October-March period, reflecting a rise in European interest rates, although it had temporarily appreciated due to a worsening of the situation surrounding Ukraine.

3. c. With regard to corporate financing, demand for working capital had risen particularly in the CP market, reflecting raw material cost increases, whereas precautionary demand for liquidity due to the impact of COVID-19 had subsided on the whole. With respect to firms' financial positions, weakness remained -- particularly for firms in industries that are susceptible to the impact of COVID-19, as well as for small and medium-sized ones -- and these positions had been affected by raw material cost increases through the end of the fiscal year; however, they continued on an improving trend on the whole on the back of a pick-up in Japan's economy. Meanwhile, in terms of supply of funds, financial institutions' lending attitudes as perceived by firms remained accommodative.

4. d. The year-on-year rate of increase in the monetary base, while decelerating compared with a while ago, remained at somewhat less than 10 percent. That in the M2, while also decelerating compared with a while ago, had been in the range of around 3.5-4.5 percent.

3. MPMs⁴

1. a. Four MPMs were held in the second half of fiscal 2021.

   Regarding economic and financial developments, the Policy Board judged at the October and December MPMs that "Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad." It then deemed at the January MPM that "a pick-up in Japan's economy has become evident as the impact of COVID-19 at home and abroad has waned gradually." The Policy Board judged at the March MPM that "Japan's economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19."

2. b. In the conduct of monetary policy, the Policy Board decided at all the MPMs held in the second half of fiscal 2021 to maintain the following guideline for market operations under QQE with Yield Curve Control.

   1. 1. Yield curve control

         The Bank decided to set the following guideline for market operations for the intermeeting period.

         The short-term policy interest rate:
         The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank.

         The long-term interest rate:
         The Bank will purchase a necessary amount of JGBs without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

      With regard to asset purchases, the Policy Board decided to maintain the following guidelines at the MPMs held in October through January.

      1. Guidelines for asset purchases

         With regard to asset purchases other than JGB purchases, the Bank decided to set the following guidelines.

      1. (a) The Bank will purchase ETFs and J-REITs as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding.
      2. (b) The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of March 2022.

      Based on the decisions made at the December MPM regarding the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19), as described later, the Policy Board decided at the March MPM upon the following guidelines for asset purchases.

   2. 1. Guidelines for asset purchases

         With regard to asset purchases other than JGB purchases, the Bank decided to set the following guidelines.

      1. (a) The Bank will purchase ETFs and J-REITs as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding.
      2. (b) The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of March 2022. From April onward, it will purchase these assets at about the same pace as prior to the COVID-19 pandemic, so that their amounts outstanding will gradually return to pre-pandemic levels, namely, about 2 trillion yen for CP and about 3 trillion yen for corporate bonds.

      At the December MPM, the Policy Board confirmed the following with regard to financial conditions.

      Financial conditions in Japan have improved on the whole, despite the continued significant impact of COVID-19 on domestic and overseas economies. With regard to financial conditions surrounding large firms, issuance conditions for CP and corporate bonds have been favorable, and precautionary demand for liquidity has subsided in the loan market. Regarding small and medium-sized firms, their financial positions have been on an improving trend on the whole, but weakness has remained in some segments, such as the face-to-face services industry.

      Given these developments, the Policy Board decided to extend the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19) in part by six months until the end of September 2022, with a view to continuing to support financing, mainly of small and medium-sized firms. The details of the decisions are as follows.

      1. (a) Special Funds-Supplying Operations to Facilitate Financing in Response to the Novel Coronavirus (COVID-19)
         1. (i) Regarding the fund-provisioning against loans that financial institutions make on their own ("non-government-supported loans") in response to COVID-19, mainly to small and medium-sized firms, the Bank will extend the implementation period by six months under the current terms and conditions.
         2. (ii) Regarding the fund-provisioning against loans that financial institutions make on the back of government support ("government-supported loans") in response to COVID-19, mainly to small and medium-sized firms, the Bank will extend the implementation period by six months under the revised terms and conditions. Specifically, from April 2022 onward, this fund-provisioning will fall under Category III in the Interest Scheme to Promote Lending, for which the applied interest rate is 0 percent, and the amount to be added to the Macro Add-on Balances in current accounts held by financial institutions at the Bank will be the amount outstanding of funds they receive. In accordance with the revised terms and conditions, the Bank will continue to provide funds to financial institutions against government-supported loans they make.
         3. (iii) The Bank will complete the fund-provisioning against private debt pledged as collateral, which mainly consists of debt issued by large firms and housing loans, at the end of March 2022 as scheduled.
      2. (b) Purchases of CP and corporate bonds
         The Bank will complete its additional purchases of CP and corporate bonds at the end of March 2022 as scheduled. From April 2022 onward, it will purchase about the same amount of CP and corporate bonds as prior to the COVID-19 pandemic, so that the amounts outstanding of these assets will decrease gradually to the pre-pandemic levels, namely, about 2 trillion yen for CP and about 3 trillion yen for corporate bonds.

      With regard to the future conduct of monetary policy, the Policy Board confirmed the following at all the MPMs held in the second half of fiscal 2021: "the Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. The Bank will continue to support financing mainly of firms and maintain stability in financial markets through (1) the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19), (2) an ample provision of yen and foreign currency funds without setting upper limits mainly by purchasing JGBs and conducting the U.S. dollar funds-supplying operations, and (3) purchases of ETFs and J-REITs with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding. For the time being, the Bank will closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels."

Notes:

• 3.The review provided here comprises excerpts from the summaries of the latest two issues of the Semiannual Report on Currency and Monetary Control submitted to the Diet in December 2021 and June 2022. The full texts of both issues in Japanese and summaries in English are available on the Bank's website.
• 4.Information related to MPMs is available on the "Monetary Policy Meetings" page on the Bank's website.

III. Performance Reviews of Measures Taken under the Medium-Term Strategic Plan

A. Plan and Formulate Monetary Policy Measures That Facilitate Policy Conduct

1. Progress in implementing specific measures

1. (1) With a view to contributing to monetary policy conduct, the Bank conducted research and analysis from multiple perspectives regarding economic and financial conditions at home and abroad, such as the effects of global supply-side constraints and the rise in international commodity prices, while gaining an accurate grasp of changes in circumstances due to the impact of COVID-19. The results of these analyses were released, for example, in the quarterly Outlook for Economic Activity and Prices (hereafter the Outlook Report) and in the Bank of Japan Review Series.
2. (2) The Bank conducted multi-perspective analysis, particularly on the policy efficacy and impacts of QQE with Yield Curve Control and of the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19) (hereafter the Special Program), while also accounting for the impact of COVID-19. In light of its findings, it closely examined developments in corporate financing and decided on the following regarding the Special Program.
   1. (a) A six-month extension of the duration of the Special Program to last until the end of March 2022 (decided in June 2021).
   2. (b) A six-month extension of the duration of the part of the Special Program that supports financing, mainly of small and medium-sized firms, to last until the end of September 2022 (decided in December 2021).
3. (3) In order to support private sector efforts on climate change, the Bank introduced the Climate Response Financing Operations, through which it provides funds to financial institutions for investment or loans that they make to address climate change issues.
4. (4) The Bank organized a workshop in March 2022 on "Issues Surrounding Price Developments during the COVID-19 Pandemic," conducting a wide-ranging discussion with representatives from academia to deepen understanding of inflation dynamics in Japan and their context, as well as understanding of recent differences in price developments at home and abroad.
5. (5) The Bank maintained dialogue with market participants by, for example, actively exchanging opinions on such occasions as the "Meeting on Market Operations" and the "Bond Market Group Meeting," each held twice in fiscal 2021 mainly via telephone conferencing.
6. (6) Progress was made in fundamental research on the following: monetary policy; the macroeconomy; financial markets; legal and accounting systems, as well as information security, in finance-related fields; and monetary history. The Bank communicated its research findings to the public through the release of research papers and presentations at academic conferences at home and abroad. It also disseminated information introducing major research findings from economic studies relating to climate change.

2. Evaluation of progress

With a view to contributing to monetary policy conduct, the Bank conducted research and analysis from multiple perspectives regarding economic and financial conditions at home and abroad; it also carried out multi-perspective analysis on the efficacy and impacts of monetary policy. In light of its findings, the Bank moved nimbly to plan and formulate policy measures. In addition, it introduced the Climate Response Financing Operations to support private sector efforts on climate change. Meanwhile, the Bank maintained dialogue with market participants through, for example, the "Meeting on Market Operations" and the "Bond Market Group Meeting," and made steady adjustments to its operational arrangements so as to ensure that monetary policy continued to be conducted appropriately.

Based on the above, the Bank considers that, in fiscal 2021, it achieved its intended objectives in implementing measures and provided a firm underpinning for monetary policy conduct, while addressing new challenges related to climate change. In fiscal 2022, the Bank will continue to work to conduct research and analysis that appropriately reflect various changes in economic and financial conditions, including the impact of COVID-19 and changes in price conditions at home and abroad, to move nimbly to plan policy measures, and to have the necessary operational arrangements in place to conduct market operations properly.

B. Ensure the Stability and Improve the Functioning of the Financial System

1. Progress in implementing specific measures

1. (1) The Bank resumed on-site examinations using remote methods to prevent the spread of COVID-19 and reduce the operational burden on financial institutions; it carried out examinations of 59 financial institutions. Examinations were conducted flexibly and efficiently, depending on the extent of an institution's systemic influence and risk profile. The Bank thereby gained an appropriate grasp of, for example, business operations and asset quality, profitability, and resilience against risks at individual institutions, as well as the business conditions of financial groups as a whole.
2. (2) With regard to off-site monitoring of financial institutions, the Bank closely followed developments in, for example, business operations, risk management, and profitability, while also allowing for the impact of COVID-19. It also conducted in-depth research and analysis, particularly on the efficacy and impacts of QQE with Yield Curve Control and of various policy responses to the pandemic, the transition from Japanese yen LIBOR, responses to climate change, and efforts toward digitalization. In addition, the Bank conducted off-site monitoring of systemically important financial institutions given developments such as changes in business models and risk profiles. With regard to regional financial institutions, the Bank encouraged initiatives to strengthen their business foundations and implemented the Special Deposit Facility to Enhance the Resilience of the Regional Financial System (hereafter the Special Deposit Facility).
3. (3) In the two issues of the 2021 Financial System Report, released in April and October, the Bank assessed the stability of Japan's financial system amid the ongoing impact of COVID-19, and deepened its analysis particularly on risks associated with credit costs, securities investment, and foreign currency funding. In addition, it released four issues of the Financial System Report Annex Series in fiscal 2021, providing more detailed analysis of and insight into selected topics. Meanwhile, on the communications side, the Bank made use of online communication tools on various occasions to provide explanations to a wide range of relevant parties, including financial institutions, analysts, the media, and academics, mainly through holding seminars and giving presentations at various international meetings (there were 87 such occasions in total in fiscal 2021).
4. (4) The Bank executed business operations for the Special Deposit Facility in an appropriate manner. In addition, in order to ensure due conduct of the facility, it amended the limit on the eligible amount for special remuneration.
5. (5) The Financial Services Agency (FSA) and the Bank continued to work to increasingly share awareness of challenges and risks at all levels, for example, by holding meetings of the "Council for Cooperation on Financial Stability." In addition, with a view to implementing higher quality monitoring and reducing the operational burden on financial institutions, the FSA and the Bank intensified efforts to strengthen cooperation through the "Financial Monitoring Council." They steadily pushed forward with initiatives in various fields in fiscal 2021: for instance, they expanded joint surveys targeting major financial institutions; coordinated the planning of the FSA's inspections and the Bank's on-site examinations; shared the findings of inspections and examinations; and stepped up efforts toward integrating and abolishing templates of various data and reports submitted by financial institutions as well as toward unifying submission destinations.
6. (6) The Bank continued its stable execution of business operations for the Loan Support Program.
7. (7) The Bank hosted, via livestream, a seminar on financial institutions' efforts to address climate change. In addition, it uploaded videos of the seminar on the Bank's website, organizing the content into two parts.

2. Evaluation of progress

The Bank thoroughly assessed and facilitated necessary improvements in, particularly, the business operations and risk management at financial institutions through, for example, presenting its assessment in the Financial System Report of challenges and risks faced in maintaining and improving the stability and functioning of the financial system as well as through its conduct of on-site examinations and strengthening of off-site monitoring in light of that assessment. As part of this process, the Bank also worked to strengthen the integration of on-site examinations and off-site monitoring. In addition, it deepened dialogue with regional financial institutions through the conduct of the Special Deposit Facility and encouraged initiatives to strengthen their business foundations.

The Bank carried out, in an efficient and appropriate manner, the selection of financial institutions with which to conduct transactions as well as business operations relating to the provision of loans. It also steadily pushed forward with its cooperation with the FSA in various fields, thereby further strengthening coordination on the prudential front.

During fiscal 2021, there were no circumstances that required the Bank to provide loans pursuant to Articles 37 and 38 of the Bank of Japan Act.

Based on the above, the Bank considers that it achieved its intended objectives in implementing measures toward ensuring the stability and improving the functioning of the financial system. In fiscal 2022, the Bank will thoroughly assess, particularly, the business operations and risk management at financial institutions by continuing to (1) conduct on-site examinations using remote methods, (2) strengthen the integration of on-site examinations and off-site monitoring, and (3) take initiatives to further strengthen coordination with the FSA. In addition, it will step up its efforts to deal with such challenges as responses to climate change, the digitalization of finance, and cybersecurity management. The Bank will also deepen dialogue with regional financial institutions on measures to support regional economies and strengthen their business foundations, including the use of the Special Deposit Facility.

C. Enhance Payment and Settlement Services and Reinforce Market Infrastructures

1. Progress in implementing specific measures

1. (1) With regard to central bank digital currencies (CBDCs), the Bank, in accordance with "The Bank of Japan's Approach to Central Bank Digital Currency," advanced steadily with conducting experiments, exploring requisite institutional arrangements, and coordinating with stakeholders at home and abroad as follows.
   1. (a) As for experiments with CBDCs, the Bank completed Proof of Concept (PoC) Phase 1 in fiscal 2021 and made necessary arrangements to start PoC Phase 2 from fiscal 2022.
   2. (b) As part of its exploration of requisite institutional arrangements, the Bank conducted analysis on standardization of information technology (IT) relating to digital currency and released two issues of the Payment and Settlement Systems Report Annex Series in fiscal 2021.
   3. (c) The Bank held a meeting of the "Liaison and Coordination Committee on Central Bank Digital Currency" in October 2021. It shared details and exchanged views with the private sector and the government regarding, for example, updates on the PoC as well as cooperation and role-sharing arrangements between the central bank and the private sector.
   4. (d) The Bank hosted meetings of the "Future of Payments Forum: Digital Currency Subcommittee" in June and November 2021 as well as in January 2022. It exchanged views with a wide range of relevant parties on specific technologies and approaches that could be utilized for CBDCs.
   5. (e) The Bank, as a member of the group of major central banks assessing potential cases for CBDCs with the Bank for International Settlements (BIS), jointly released a set of reports with the group in September 2021 on (1) system design and interoperability, (2) user needs and adoption, and (3) financial stability implications.
2. (2) The Bank contributed to discussions on standardization in financial services through, for example, hosting the "Meeting of the International Organization for Standardization (ISO) Panel" in June and November 2021 as well as in February 2022.
3. (3) The Bank joined the "Task Force for the Next-Generation Payment Systems" and associated working groups, set up by the Japanese Banks' Payment Clearing Network (Zengin-Net). It supported specific deliberations on the participation of funds transfer service providers in the Zengin Data Telecommunication System (Zengin System), how to enhance the convenience of frequent payments in small amounts, and the development of the 8th Generation Zengin System, which is scheduled to begin operation in 2027.
4. (4) The Bank started system operations for a cross-border delivery-versus-payment (DVP) link between the Bank of Japan Financial Network System (BOJ-NET) JGB Services and the Hong Kong Dollar Clearing House Automated Transfer System (HKD CHATS) in April 2021.
5. (5) In its role as the secretariat of the "Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks" (hereafter the Committee), the Bank, mainly through the activities described below, supported market participants' initiatives on the reform of Japanese yen interest rate benchmarks and contributed to the smooth transition from Japanese yen LIBOR in preparation for the permanent cessation of its publication at the end of 2021. After the completion of this transition, the Committee was subsequently reorganized and, in March 2022, established as the "Cross-Industry Forum on Interest Rate Benchmarks," with the Bank serving as its secretariat.
   1. (a) The Committee updated the "Roadmap to Prepare for the Discontinuation of Japanese Yen LIBOR" in April 2021.
   2. (b) The Committee surveyed progress in the transition from Japanese Yen LIBOR through questionnaires asking about conditions surrounding the transition as of end-September, end-November, and end-December 2021 to assess progress and identify challenges.
   3. (c) The Committee supported the publication in April 2021 of production rates for Term Reference Rates.
   4. (d) The Committee published convention tools for the calculation of interest on the Tokyo Overnight Average Rate (TONA) Compounding (Fixing in Arrears) in September 2021.
   5. (e) The Committee released the "Final Report on the Results of the Public Consultation on the Treatment of Tough Legacy Contracts in Japan" in November 2021.
6. (6) The Bank released the "Final Report on the Results of the Public Consultation on the Market Functioning Survey concerning Climate Change" in March 2022 and continued its deliberations on conducting the first round of the survey.
7. (7) The Bank released a renewed "Statement of Commitment to the FX Global Code" in September 2021 taking into consideration updates to the content of the Code. It also pushed forward with initiatives to encourage market participants in Japan to reaffirm their commitment to adhere to the Code, including its updates, as well as initiatives to further extend compliance with the Code among market participants.

2. Evaluation of progress

With regard to CBDCs, the Bank, in accordance with "The Bank of Japan's Approach to Central Bank Digital Currency," advanced steadily with conducting experiments, exploring requisite institutional arrangements, and coordinating with stakeholders at home and abroad. In addition, it actively contributed to discussions at home and abroad regarding the new possibilities and challenges that IT advances present for payment and settlement services, while making steady progress in working toward the enhancement of such services in Japan.

As for the reinforcement of the infrastructures of financial and capital markets, the Bank supported market participants' initiatives on the reform of Japanese yen interest rate benchmarks and contributed to the smooth transition from Japanese yen LIBOR in preparation for the permanent cessation of its publication. It also continued its deliberations toward assessing the functioning of financial markets in Japan in relation to climate change and identifying related challenges. Moreover, the Bank contributed to the update of the FX Global Code and promoted adherence by market participants.

Based on the above, the Bank considers that, in fiscal 2021, it achieved its intended objectives in implementing measures, and made notable contributions to enhancing payment and settlement services and reinforcing the infrastructures of financial and capital markets in Japan. In fiscal 2022, with respect to payment and settlement services, the Bank will continue to contribute to discussions at home and abroad regarding CBDCs, while steadily promoting the PoC and exploring requisite institutional arrangements; it will also continue to work toward the enhancement of payment and settlement services in Japan. Furthermore, as for the reinforcement of the infrastructures of financial and capital markets in Japan, the Bank will contribute to the development of financial markets by assessing market functioning in relation to climate change and identifying related challenges, while supporting market participants' initiatives to facilitate smooth transactions referencing Japanese yen interest rate benchmarks.

D. Conduct Stable and Efficient Central Banking Operations

1. Progress in implementing specific measures

1. (1) Taking account of the government's Basic Policies for Novel Coronavirus Disease Control, the Bank, while responding as necessary given the COVID-19 situation, implemented measures to ensure smooth conduct of central banking operations in sections engaged in, for example, (1) market operations, (2) settlement of funds and Japanese government securities (JGSs), (3) services relating to treasury funds, and (4) receipt and payment of banknotes, even when there were cases of staff infection.
2. (2) The Bank continued, on a daily basis, to settle financial transactions involving current account deposits that financial institutions hold at the Bank in an accurate and stable manner.
3. (3) The Bank conducted market operations appropriately in accordance with the guidelines decided at MPMs for market operations and asset purchases. It duly responded to changes in the market environment by, for example, revising the tools for market operations as well as their frequency and size in a timely and flexible manner, depending on market developments.
4. (4) With regard to the introduction of a new 500 yen coin, the Bank, in coordination with the Ministry of Finance (MOF) and other relevant parties, completed the necessary preparations and commenced issuance in November 2021. In coordination with the MOF and the National Printing Bureau (NPB), the Bank also proceeded with preparations for the introduction of a new series of Bank of Japan notes; this included completing quality checks of the new banknotes and holding an exhibition of sample banknotes for banknote equipment manufacturers.
5. (5) The Bank ensured the smooth supply of clean banknotes from its Head Office and branches and maintained the cleanliness of banknotes in circulation by examining the banknotes it received. As part of the process, it monitored and improved the level of the cleanliness of banknotes in circulation.
6. (6) The Bank worked to gain an understanding of the current situation regarding the use of cash, mainly by gathering information from relevant parties. Based on the information gathered, it sought to raise the efficiency of cash handling at both the Bank and financial institutions.
7. (7) The Bank carried out a wide range of treasury funds and JGS services with precision. It also worked to streamline and digitize business operations by, for example, reducing the number of agents and promoting further use of cashless payments of treasury funds through the provision of support to relevant parties. In addition, while responding positively to the need for financial institutions to improve the efficiency of their business processes, the Bank cooperated with the ministries and agencies responsible to promote abolishing the use of hanko (the affixing of seals) on paper documents for, and making paperless, various administrative procedures related to treasury funds and JGS services. Meanwhile, the Bank also made steady progress toward the establishment of a system that allows the online transmission of documents between financial institutions and the Bank.

2. Evaluation of progress

Taking account of the government's Basic Policies for Novel Coronavirus Disease Control, as a designated public institution under the Act on Special Measures for Pandemic Influenza and New Infectious Diseases Preparedness and Response, the Bank implemented measures to ensure smooth conduct of central banking operations.

With regard to banking operations, the Bank continued to settle financial transactions involving current account deposits that financial institutions hold at the Bank in an accurate and stable manner, and conducted market operations appropriately in accordance with the guidelines decided at MPMs.

As for business operations relating to cash, the Bank carried out the receipt and payment of banknotes and coins in a stable and efficient manner. With regard to the introduction of a new 500 yen coin, the Bank completed the necessary preparations and commenced issuance. In coordination with the MOF and the NPB, the Bank also proceeded steadily with preparations for the introduction of a new series of Bank of Japan notes. In addition, the Bank worked to secure confidence in banknotes by, for example, proceeding smoothly with replacing automatic banknote examination machines with the new model; it also made progress in understanding the current situation of cash circulation mainly by gathering information from relevant parties.

The Bank, on a daily basis, carried out treasury funds and JGS services in a stable manner; it also worked to streamline and digitize business operations and reviewed its business processes in response to changes in its operational environment.

Based on the above, the Bank considers that, in fiscal 2021, it conducted stable central banking operations on a daily basis while ensuring that appropriate operational arrangements were in place as it responded to COVID-19; it also advanced steadily with the reviewing of its business processes in response to changes in its operational environment. In fiscal 2022, while carrying out measures to prevent the spread of COVID-19, the Bank will conduct its business operations at its Head Office and branches in a stable manner, and constantly pursue excellence in central banking services in light of trending changes, both qualitative and quantitative, in its operations.

E. Contribute to International Finance amid Globalization

1. Progress in implementing specific measures

1. (1) The Bank, as the central bank of Japan, actively participated in meetings such as those organized by the Association of Southeast Asian Nations Plus Three (ASEAN Plus Three), the BIS, the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP), the Financial Stability Board (FSB), the Group of Seven (G7), the Group of Twenty (G20), the International Monetary Fund (IMF), the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), and the Organisation for Economic Co-operation and Development (OECD). While these meetings were mainly held online given the ongoing impact of COVID-19, some meetings were resumed face to face. The following achievements were made.
   1. (a) The Bank contributed to discussions at the global level on, for example, the international financial responses to climate change, digitalization, and the spread of COVID-19, as well as responses to the situation surrounding Ukraine.
   2. (b) The Bank contributed to discussions at global forums on fostering economic growth as well as on strengthening the robustness of the financial system based on its analysis of overseas economic and financial developments, while also promoting an understanding of its conduct of monetary policy.
   3. (c) With regard to financial regulation and supervision, the Bank, in cooperation with the FSA, actively participated in discussions on the implementation and impact assessment of, for example, international financial regulations, the enhancement of supervision, and responses to climate-related financial risks; it also contributed appropriately to policy-making processes for ensuring the stability of the international financial system.
   4. (d) In relation to the NGFS, the Bank participated in and contributed to discussions on various topics, including climate scenario analysis.
   5. (e) The Bank continued to participate in and contribute to, for example, discussions in the fields of global financial markets, financial market infrastructures, interest rate benchmark reform, the FX Global Code, and statistics.
   6. (f) In relation to the EMEAP, the Bank played a key role in discussions on economic and financial conditions in the region as well as in the management of the Asian Bond Fund (ABF), in the course of which it also advanced initiatives to promote investment in green bonds through the ABF.
   7. (g) At some BIS- and EMEAP-related committees, the Bank played a leadership role, for example, by moderating discussions as the chair.
   8. (h) The Bank participated in the Irving Fisher Committee on Central Bank Statistics (IFC), with an official serving as a member of the IFC Executive, and played a part in discussions at the global level, for example, through the presentation of papers at related conferences.
2. (2) The Bank actively exchanged information with overseas authorities on business conditions at systemically important financial institutions, mainly through supervisory colleges.
3. (3) The Bank obtained prompt access to a wide range of information, for example, on economic and financial conditions, the financial system, and central banking operations, through individual exchanges of opinions with major central banks and other relevant parties as well as the continued strengthening of relations with monetary authorities in Asia.
4. (4) With regard to international monetary cooperation, in the area of currency swaps for the stability of the financial system, the Bank extended bilateral local currency swap agreements with the People's Bank of China, allowing for the exchange of renminbi and yen, and with the Reserve Bank of Australia, allowing for the exchange of Australian dollars and yen between the two central banks, in October 2021 and March 2022, respectively.
5. (5) Under the framework of ASEAN Plus Three, the Bank, together with the MOF, played a key role in discussions regarding the establishment of operational arrangements to provide liquidity in local currencies under the Chiang Mai Initiative Multilateralisation (CMIM) and in various deliberations toward enhancing the practicability of such arrangements.
6. (6) In response to the IMF's request to the Japanese government, the Bank, in cooperation with the MOF, contributed to the smooth implementation of financial assistance for low-income countries using the Foreign Exchange Fund Special Account, among other such activities.
7. (7) The Bank continued to provide technical assistance, hold seminars, and exchange personnel, mainly with other central banks in Asia, making use of online communication tools (there were 50 such occasions in total in fiscal 2021). The Bank thus contributed to the stability and development of financial and capital markets in Asia and established and strengthened medium- to long-term relationships with overseas authorities.

2. Evaluation of progress

The Bank, as the central bank of Japan, participated in discussions at the global level on responses to climate change and to COVID-19, thereby playing a part in international cooperation. It also actively participated in meetings such as those organized by the BIS and the EMEAP on topics including financial regulation, financial markets, and financial market infrastructures. Through these initiatives, the Bank contributed to and played a leadership role in discussions toward ensuring the stability of the international currency and financial system. Moreover, it boosted bilateral monetary cooperation in the Asian region and provided technical assistance, most of which was provided within the region. The Bank maintained and strengthened cooperation with overseas authorities, especially central banks, and obtained prompt access to a wide range of information, for example, on economic and financial conditions, the financial system, and central banking operations.

Based on the above, the Bank considers that it made steady progress in fiscal 2021 in terms of measures taken to contribute, as the central bank of Japan, toward ensuring the stability of the international currency and financial system as well as toward securing the stability and development of financial and capital markets in Asia. In fiscal 2022, the Bank will continue to work in cooperation with relevant parties to deepen and extend the initiatives taken to date, particularly in Asia, while also participating in discussions at the global level on responses to climate change and COVID-19, in particular.

F. Contribute to Regional Economic and Financial Environments

1. Progress in implementing specific measures

1. (1) While ensuring that the system continued to provide essential services amid the ongoing impact of COVID-19, the Bank, at its Head Office and branches, stably conducted central banking operations, including business operations relating to banknote issuance as well as services relating to treasury funds and JGSs, holding working-level meetings with financial institutions that hold current accounts at the Bank as well as ministries and government agencies through due use of online communication tools.
2. (2) At each of the following branches, the Bank, in cooperation with the respective local finance bureaus, requested that financial institutions take special measures in response to disasters: Aomori, Sendai, Fukushima, Matsumoto, Shizuoka, Hiroshima, Matsue, Fukuoka, Nagasaki, and Kagoshima.
3. (3) The Bank maintained a detailed grasp of regional economic and financial conditions via its Head Office, branches, and local offices by, for example, actively conducting interviews mainly with local businesses and financial institutions, as well as holding meetings with economic organizations to exchange opinions; communication was carried out using online tools or in face-to-face settings depending on the COVID-19 situation. The Bank utilized its findings in conducting monetary policy as well as in ensuring the stability and improving the functioning of the financial system.
   1. (a) With regard to demand for rebuilding and reconstruction following major earthquakes such as the Great East Japan Earthquake and the Kumamoto Earthquake, as well as large-scale storm and flood damage that occurred in Japan in recent years, the Bank maintained a thorough grasp of the situation by making use of its networks of branches and offices in the disaster-stricken areas.
4. (4) The Bank disseminated the results of its research and analysis on regional economic developments as well as the thinking behind its policies and business operations to each region by, for example, organizing speeches and undertaking other public relations activities, making due use of online and other communication tools. The Bank's findings from research and analysis on regional economic developments were compiled and released each quarter in the Regional Economic Report. The Bank also released, in fiscal 2021, an issue of the annex series to the report, which provides more detailed analysis of and insight into a selected topic; the issue (available only in Japanese) addressed initiatives by consumption-related firms in each region in the wake of COVID-19 and the challenges they face.
5. (5) In fiscal 2021, the Bank's Center for Advanced Financial Technology (CAFT) hosted a livestreamed workshop on recruiting and staffing services, targeted mainly at regional financial institutions.

2. Evaluation of progress

The Bank, at its Head Office and branches, conducted central banking operations in a stable manner amid the ongoing impact of COVID-19. It also maintained a detailed grasp of economic and financial conditions specific to each region through active research efforts; it disseminated its findings to each region and utilized them in conducting monetary policy as well as in ensuring the stability and improving the functioning of the financial system.

Based on the above, the Bank considers that, despite the impact of COVID-19, it made progress in fiscal 2021 in terms of initiatives taken to contribute to regional economic and financial environments, making due use of the functions performed as the country's central bank by its Head Office, branches, and local offices. In fiscal 2022, the Bank will continue to provide appropriate central banking services in each region of the country. It will also work particularly to maintain an accurate grasp of regional economic and financial conditions and of region-specific challenges as well as to disseminate its findings, with a view to supporting sustainable development. In doing so, the Bank will continue to closely monitor the impact of COVID-19 on regional economic and financial conditions. With regard to organizing speeches and undertaking other public relations activities, the Bank will make the appropriate decision in each case in light of the COVID-19 situation in the respective region, making due use of online and other communication tools.

G. Strengthen External Communication

1. Progress in implementing specific measures

1. (1) In accordance with the Bank of Japan Act, the Bank kept the public fully informed regarding its conduct of monetary policy and business operations via the following.
   1. (a) Releasing the minutes and transcripts of MPMs.
   2. (b) Submitting the Semiannual Report on Currency and Monetary Control to the Diet in June and December 2021, and releasing the full texts of the two issues in Japanese as well as the summaries in English on the Bank's website.⁵
   3. (c) Publishing the Gyoumu Gaikyo Sho (Outline of Business Operations) for fiscal 2020 in May 2021.
2. (2) The Bank made use of a variety of channels to communicate its conduct of monetary policy and business operations to the public, working to promote a deeper understanding of its policy intentions. These communication channels included the following.
   1. (a) Public statements on the Bank's monetary policy decisions, such as the "Statement on Monetary Policy"; the Outlook Report released in April, July, and October 2021 as well as in January 2022; and a document that contains a summary of the opinions presented at each MPM (Summary of Opinions).
   2. (b) Press conferences, speeches, and articles by the Governor, Deputy Governors, and Members of the Policy Board. Meetings with business or local leaders were held face to face or online.
3. (3) While enhancing the digital contents of its communication platforms and making use of online communication tools amid the ongoing impact of COVID-19 on face-to-face activities, the Bank engaged in the following public relations activities, which it sought to make clear, intelligible, and accessible to a wide range of target audiences, thereby promoting a better understanding among the public of its conduct of monetary policy and business operations.
   1. (a) In addition to making the Bank's releases available on its websites, the Bank made use of social networking sites, thereby disseminating information to a wider audience in an apposite and timely manner. The number of page views on the Bank's website was around 518 million, of which around 307 million were made to its English-language pages. The number of page views on its branches' websites was around 4.8 million in total. Followers of the Bank's Twitter and Facebook accounts totaled around 201,000 and around 5,100, respectively.
   2. (b) The Bank enhanced the content of Nichigin, its public relations magazine (available only in Japanese), for example, by including articles that provided accessible descriptions of its policies and business operations.
   3. (c) The Bank conducted in-house tours of its Head Office and branches in accordance with the government's Basic Policies for Novel Coronavirus Disease Control, and taking into account the situation in each region including requests by local governments. It temporarily suspended in-house tours of its Head Office in light of the COVID-19 situation and took preventive measures against the spread of COVID-19 when admitting tour participants. Meanwhile, the Bank enhanced the contents of the "BOJ from Home" page on its website that offers an online tour of its Head Office. Utilizing these, it also launched an online program for educational institutions offering livestreamed lectures about the Bank in addition to the Head Office tours. The total number of Head Office tour participants was around 4,800, and there were around 110,000 page views on "BOJ from Home." The Bank also offered in-house tours of its branches with due caution, depending on the system in place at each branch for accepting participants, while organizing activities making use of online and other communication tools. The total number of participants in tours of branches was around 5,800.
   4. (d) Through enhancing the digital contents of its communication platforms and hosting various public relations events, the Bank provided opportunities for the public to deepen their understanding of its policies and business operations. For example, the Bank added to its web page new video content targeting families with primary and junior high school children and allowing them to experience part of the special in-house tour program conducted during school holidays before the outbreak of COVID-19. The Bank also hosted at its Head Office the "BOJ Grand-Prix," an essay and presentation contest primarily for college students, for which there were 122 entries.
   5. (e) The Bank gave lectures to young people on its functions and operations. Its Head Office gave a total of 12 lectures to college students making due use of online communication tools.
4. (4) The Bank actively disseminated information on its conduct of monetary policy and business operations in English.
5. (5) The Bank worked to gain a better grasp of public opinion as well as public needs regarding its policies and business operations from people across a wide range of fields via the following.
   1. (a) Holding face-to-face or online meetings and dialogues with financial institutions, firms, economic organizations, academics, and other parties concerned in the Bank's business operations.
   2. (b) Provision of pertinent responses to around 2,900 inquiries and comments received at the Head Office via phone calls or e-mails (excluding those for sales purposes or those that were incorrectly addressed).
6. (6) The Bank operated the Currency Museum and the Bank of Japan Otaru Museum appropriately through, for example, (1) temporarily closing the museums, taking into account circumstances such as the COVID-19 situation in each region and requests by national and local governments, and (2) taking necessary preventive measures against the spread of COVID-19 when admitting visitors. Visitor numbers to each museum during fiscal 2021 were around 37,000 and 18,000, respectively. Meanwhile, the Bank released videos on the website of the Currency Museum introducing the content of exhibitions held at the museum, in addition to enhancing the materials included on the "Currency Museum from Home" page. The Bank also conducted online tours of the Bank of Japan Otaru Museum for primary and junior high school students.
7. (7) The Bank responsibly managed the activities of its Archives, which have the status of "the National Archives of Japan, etc." as stipulated in the Public Records and Archives Management Act as well as the order for enforcement of this Act. A total of 2,439 historical official documents were added to the Archives, and 206 requests for access were made.
8. (8) The Bank released "The Bank of Japan's Strategy on Climate Change" in July 2021. Communication with the public on the Bank's overall climate-related efforts was also enhanced by launching a page on its website and delivering speeches.
9. (9) The Bank created a new page on its website entitled "Alternative Data Analysis" that introduces its various pieces of research on and management of such data.
10. (10) The Bank made public the findings of its research and analysis on economic and financial developments, releasing 18 papers in the Bank of Japan Review Series, 20 in the Bank of Japan Working Paper Series, 22 in the IMES Discussion Paper Series, 4 research papers, and 2 in the Bank of Japan Research Laboratory Series.
11. (11) The Bank held the following conferences online: an international conference in May 2021 entitled "Adapting to the New Normal: Perspectives and Policy Challenges after the COVID-19 Pandemic" and a conference co-hosted by the Bank and the University of Tokyo in November 2021 entitled "Japan's Economy during and after the COVID-19 Era."
12. (12) The Bank revised, rebased, and made appropriate enhancements to its statistics so as to accommodate changes in the economic and regulatory environment.
    1. (a) The Bank made public in December 2021 the final draft of rebasing the corporate goods price index (CGPI) to the base year 2020 (available only in Japanese).
    2. (b) As for the "Average Interest Rates Posted at Financial Institutions by Type of Deposit," the Bank decided in February 2022 to make revisions from fiscal 2022 onward, including changing the frequency of publication and abolishing some survey items.
    3. (c) Regarding the Tankan (Short-Term Economic Survey of Enterprises in Japan), the Bank made some changes, including to the population base, as part of its regular revision of sample enterprises in the survey in March 2022.
13. (13) The Bank promoted an in-depth understanding of its statistics through the following measure.
    1. (a) The Bank enhanced the explanation of the statistics by redesigning the "Balance of Payments Related Statistics" page on its website.
14. (14) As the secretariat of the Central Council for Financial Services Information (CCFSI), and in light of changes in the environment surrounding the provision of financial information to the public, the Bank supported the CCFSI's efforts to develop a range of financial information-related activities in cooperation with relevant parties such as ministries, local public bodies, and financial and economic organizations. For example, the CCFSI launched an e-learning program on financial literacy for college students and younger employees, organized events making use of online communication tools, and made use of social networking sites.

2. Evaluation of progress

The Bank employed a variety of channels to communicate its conduct of monetary policy and business operations to various audiences at home and abroad, including the general public, and made efforts to promote a deeper understanding of its policy intentions. In disseminating information, it enhanced digital contents, while carrying out its communication using online tools or in face-to-face settings depending on the COVID-19 situation.

The Bank worked to gain a better grasp of public opinion and public needs by, for example, holding dialogues with financial institutions and firms, as well as providing pertinent responses to inquiries and comments received at the Bank.

The Bank proceeded with efforts to revise and rebase its statistics so as to accommodate changes in the economic and regulatory environment; it also implemented measures to improve their user-friendliness.

As the secretariat of the CCFSI, and in light of changes in the environment surrounding the provision of financial information to the public, the Bank supported the CCFSI's efforts to develop financial information-related activities, thereby contributing to the promotion of financial literacy among the public.

Based on the above, the Bank considers that, in fiscal 2021, it made progress in terms of strengthening external communication while responding appropriately to the COVID-19 situation and enhancing the digital contents of its communication platforms. In fiscal 2022, the Bank will continue (1) to work to achieve multilateral and effective communication at home and abroad regarding its conduct of monetary policy and business operations by making use of various communication platforms, and (2) to better grasp public opinion and public needs by maintaining and strengthening relationships with people, firms, and economic organizations across a wide range of fields. Meanwhile, the Bank will take appropriate measures regarding implementation of certain public relations activities in light of the COVID-19 situation, and will continue with its initiatives for communication by incorporating advances in digitalization and online technologies.

Notes:

• 5.See II. Review of Economic and Financial Developments and Monetary Policy Meetings under The Bank's Review of Fiscal 2021, for excerpts from the summaries of the two issues of the report dealing with developments in fiscal 2021, namely, the issues released in December 2021 and June 2022.

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The Bank's Organizational Management in Fiscal 2021

I. Statement of Accounts and Budget for Expenses

As for the Bank of Japan's expenses for fiscal 2021, the Bank duly made, in line with the budget, the disbursements necessary to cover the Medium-Term Strategic Plan (Fiscal 2019-2023) (hereafter the Plan). With regard to the Bank's statement of accounts for fiscal 2021, the total amount of actual expenses increased from the previous fiscal year by 3.5 percent (7.0 billion yen) to 205.8 billion yen. Regarding the Bank's budget for expenses for fiscal 2022, the Bank carefully examined overall expenditure in compiling a suitable budget for the year while securing the necessary budget to perform its role as the country's central bank.

II. IT Investment

The Bank steadily carried out the system development projects necessary to achieve the goals set out in the Plan, while working to raise the efficiency and streamline the development of such projects. The scale of system development for fiscal 2021 was 14,879 person-months¹ (including 11,568 person-months that were outsourced).

Notes:

• 1.In system development, one person-month is the workload equivalent of one person working for one month.

III. Human Resources

The Bank maintained the number of employees necessary to achieve the goals set out in the Plan without breaking the ceiling on the number of full-time employees for fiscal 2021, which was set at 4,900. Following the Bank's efforts to further increase the efficiency of its overall business operations while securing the necessary employee numbers, the number of full-time employees stood at 4,624 at the end of March 2022, down 10 from the previous fiscal year (Table 1).

Regarding remuneration, in fiscal 2021, the Bank reduced the annual remuneration for its officers by 0.8 percent from the previous fiscal year through decreasing their bonuses.

As for its employees, the Bank reduced the annual remuneration for fiscal 2021 by 0.6 percent from the previous fiscal year. The Bank kept the base levels of salaries unchanged from the previous fiscal year. For those in non-managerial positions, the Bank paid semiannual bonuses in May and November, each amounting to 2.124 months of salary; for those in managerial positions, it paid 2.269 months of salary per semiannual bonus.

Note:

• 1.Full-time employees of the Computer Center and the Banknote Operations Center are included in the number of full-time employees at the Head Office.

IV. Organizational Management Measures

With a view to addressing the strategic objectives for its business operations stated in the Plan, the Bank implemented various organizational management measures in order to execute its business operations flexibly and secure the requisite staff for this purpose, to manage its operational risks appropriately, and to strengthen its business continuity arrangements.

Specifically, as the Bank continued to respond to the novel coronavirus (COVID-19) over an extended period, business operations conventionally conducted face to face were implemented via the active use of, for example, videoconferencing systems, with the most efficient means of communication being adopted for each given purpose and situation. Moreover, the Bank worked to secure the requisite staff for executing its business operations and organizational management, to further promote diversity in the workplace, and to steadily realize varied and flexible working arrangements aimed at further improving the work-life balance and well-being of its employees via the following.

1. (1) The Bank enhanced various staff education and training programs, including through the use of online communication tools, and continued to work to promote personnel exchanges with institutions inside and outside Japan.
2. (2) The Bank, under the second phase of its action plans compiled and released in March 2021 pursuant to the Act on Promotion of Women's Participation and Advancement in the Workplace, undertook initiatives to ensure that its female employees could fully realize their potential at work, and strived to cultivate a workplace environment conducive to the well-being of all of its employees.
3. (3) With regard to staff recruitment for fiscal 2022, the Bank proactively recruited women; they accounted for over 30 percent of the new recruits who will be future candidates for positions of Director, Chief Manager, and above.²

In addition to the above, the Bank took business continuity-related actions in response to COVID-19. It also implemented measures to strengthen business continuity arrangements that included the steady enhancement of the disaster countermeasures in place at its Head Office and branches based on its experience following the Great East Japan Earthquake, the Kumamoto Earthquake, and large-scale storm and flood damage, as well as the government's reappraisal of potential damage scenarios for large-scale earthquakes directly hitting Tokyo or occurring in the Nankai Trough area.

Notes:

• 2.Employees in the positions of Director, Chief Manager, and above oversee the execution of business operations assigned to them, and are responsible for organizational management within their sections.

V. Internal Audits

The Internal Auditors' Office at the Bank conducts internal audits of the Bank's business operations at its Head Office, branches, local offices, and overseas representative offices in order to examine the appropriateness of its business operations and the adequacy of its operational risk management as well as the fairness with which its business operations are executed. The results of audits are reported to the Policy Board.

In fiscal 2021, the Internal Auditors' Office audited 5 departments at the Bank's Head Office (the Payment and Settlement Systems Department, the Financial Markets Department, the Research and Statistics Department, the Currency Issue Department, and the Personnel and Corporate Affairs Department), 16 branches (Kushiro, Sapporo, Hakodate, Aomori, Akita, Fukushima, Maebashi, Yokohama, Kanazawa, Kofu, Matsumoto, Matsue, Kochi, Kitakyushu, Kagoshima, and Naha), and 8 local offices (Mito, Obihiro, Asahikawa, Toyama, Fukui, Nagano, Tottori, and Miyazaki).

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Climate Change Initiatives: Disclosure Based on TCFD Recommendations

This is a reprint of Climate Change Initiatives: Disclosure Based on TCFD Recommendations [PDF 99KB] released on May 27, 2022.

Introduction

The Bank of Japan, in its Medium-Term Strategic Plan (Fiscal 2019-2023), describes the environment surrounding central banks: in the broader context of the global economy and society, various entities are expected to address the Sustainable Development Goals (SDGs). There is widespread acceptance both in Japan and overseas that climate change in particular is a global challenge that could have a broad impact on society and economic activity into the future, and that central banks are expected to address this issue from their particular standpoints.

In this context, the Bank outlined its basic stance on and comprehensive approach to climate change in The Bank of Japan's Strategy on Climate Change, released in July 2021, and is moving forward with various measures on this basis. Among these measures, in terms of external communication, the Bank announced that it will make disclosures that take into account the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The TCFD recommends that each entity disclose climate change efforts in four thematic areas: governance, strategy, risk management, and metrics and targets (Table 1). The Bank's initiatives regarding climate change are summarized below in line with the recommendations, consistent with the nature of the Bank's policies and business operations aimed at achieving price stability and ensuring the stability of the financial system.

I. Governance

The Bank of Japan's Strategy on Climate Change was decided at the Policy Board meeting held on July 16, 2021. At the meeting held on March 25, 2022, the Bank conducted an interim review of the Medium-Term Strategic Plan (Fiscal 2019-2023). The Bank regarded developments in climate change as one of the main challenges it has faced in conducting business operations and organizational management since the formulation of the Plan. The Bank also decided that it will continue to address climate change in line with its Strategy for the remaining period of the Plan.

The Strategy outlines measures across a range of areas: monetary policy, the financial system, research, international finance, and business operations and external communication. Under these measures, the Bank will take important actions based on the decisions of the Policy Board, with various departments of the Bank and officers in charge promoting a specific response in each area. To support this process, the Bank set up the Climate Coordination Hub (CCH), an internal network, and put in place a collaborative framework led by the Head of the CCH to promote information sharing and coordination on various measures and address issues related to climate change. At present, the CCH consists of members from the Secretariat of the Policy Board, the Monetary Affairs Department, the Financial System and Bank Examination Department, the Payment and Settlement Systems Department, the Financial Markets Department, the Research and Statistics Department, and the Institute for Monetary and Economic Studies. The International Department serves as the secretariat for the CCH, and meetings are held approximately once a month. Every fiscal year, the Bank conducts performance reviews of related initiatives taken by each department as part of measures under the Plan.

II. Strategy

A. The Bank's Mandate and the Impact and Risks of Climate Change

To address climate change, various entities within society and the economy need to actively play their roles, in tandem with governments and legislative bodies that formulate relevant policies. As various stakeholders across jurisdictions, including governments and firms, accelerate their efforts concerning climate change, the Bank, as the central bank of Japan, is furthering its efforts on climate change consistent with its mandate of achieving price stability and ensuring the stability of the financial system.

To this end, the Bank has categorized the impact and risks of climate change for economic activity, prices, and the financial system as follows.

When individual firms and households engage in economic activity without due consideration of the impact of greenhouse gas emissions on climate change, this results in an excessive amount of greenhouse gas emissions in society and the economy as a whole. If this situation continues, it would result in significant negative social and economic costs. The impact of excessive greenhouse gas emissions is not limited to one country but spreads to other countries, and such emissions have far-reaching future effects. Climate change has already had a sizable impact on daily life and social activities in recent years, including the global rise in temperatures and the increasing frequency and severity of large-scale natural disasters.

In terms of the specific impact on economic activity, there has been an increase in constraints on economic activity, such as supply chain disruptions caused by natural disasters in recent years. In the medium to long run, energy price fluctuations and a decrease in investment and employment in industries with significant greenhouse gas emissions may also exert downward pressure on economic activity. On the other hand, new opportunities may arise, such as an increase in investment related to renewable energy. The future impact on economic activity is highly uncertain. Prices and wages could be affected by both natural disasters and the various measures introduced for the transition to a carbon-neutral society.

Climate change, through the channels of "physical risk" and "transition risk," can also impact the financial system. Physical risk refers to the risk that physical phenomena triggered by climate change, such as large-scale disasters and rising sea levels, will have a negative impact on firms and households. Transition risk refers to the risk of an economic impact on firms and households due to changes in policies, technologies, or consumer preferences associated with the transition to a carbon-neutral society. Depending on the response, both risks could adversely affect the financial system by changing the investment or lending behavior of financial institutions, both qualitatively and quantitatively.

B. The Bank's Strategy on Climate Change

In light of the potential impact of climate change on economic activity, prices, and the financial system, the Bank in its Strategy on Climate Change is pursuing measures in five areas: monetary policy, the financial system, research, international finance, and business operations and external communication (Table 2).

III. Risk Management

Various entities, including governments and firms, have been actively addressing climate change. In light of the risk that climate change will exert an extremely large impact on economic activity, prices, and the financial system from a medium- to long-term perspective, the Bank will further its efforts on climate change in respective areas from a central bank standpoint, consistent with its mandate of achieving price stability and ensuring the stability of the financial system. Specifically, it has made progress in the following five areas set out in its Strategy on Climate Change and will continue to pursue initiatives.

A. Monetary Policy

B. Financial System

C. Research

Note:

• 1.As of April 2022.
   * The English version will be forthcoming.
  ** Available only in Japanese (the English title is based on the Japanese original).

D. International Finance

E. The Bank's Business Operations and External Communication

The impacts of climate change on economic activity, prices, and the financial system are highly uncertain and could greatly vary over time. The risk management efforts outlined in sections A. to D. above constitute a process whereby the Bank, after having conducted sufficient research and analysis on the impact and risks of climate change on economic activity and the financial system, will pursue, from a long-term perspective, initiatives that contribute to stabilizing the macroeconomy and measures to maintain the stability of the financial system. Through its ongoing pursuit of these initiatives, the Bank will help to shape an appropriate response in society and the economy as a whole to the impact and risks of climate change. Additionally, through the efforts outlined in section E. above, the Bank will continue to address climate change in its business operations and adequately communicate its climate-related conduct to the public.

IV. Metrics and Targets

With regard to business operations and external communication mentioned in Chapter III. E., the Bank has resolved to measure and disclose direct (Scope 1) and indirect (Scope 2) carbon dioxide (CO₂) emissions arising from its own business operations every fiscal year (Table 4). Efforts so far have yielded a decrease in CO₂ emissions in recent years compared to previous levels.

In addition, the Bank is required to reduce energy consumption intensity by an annual average of 1 percent or more over the medium to long term, under the Act on the Rational Use of Energy (Energy Saving Act) enacted by the Japanese government. The Bank continues to achieve this target (Table 5).

Data for fiscal 2021 will be released on the Bank's website around this summer.

Notes:

• 1.Figures are those for the Head Office, branches, and local offices in Japan.
• 2.CO₂ emissions are calculated according to the method based on the Act on Promotion of Global Warming Countermeasures. CO₂ emissions of electricity are calculated based on the basic emissions factors of individual electricity companies.

Notes:

• 1.Figures are those for the Head Office, branches, and local offices in Japan.
• 2.Data for energy consumption cover city gas, heavy oil, kerosene, electricity, hot water, and cold water.
• 3.Figures for energy consumption are converted into crude oil equivalent by using the energy conversion factors based on the Energy Saving Act. Energy consumption intensity is energy consumption per unit of the floor area of the Bank's buildings.

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The Bank's Accounts: Financial Statements and Other Documents for Fiscal 2021

This section is not included in the HTML version of the report.

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Appendixes

Appendix 1: Overview of Audits of the Bank of Japan

This section is not included in the HTML version of the report.

Appendix 2: Medium-Term Strategic Plan (Fiscal 2019-2023)^1,2

I. Introduction

The Bank's Medium-Term Strategic Plan (Fiscal 2019-2023) (Plan) sets the basic direction for the Bank's business operations and organizational management during the five-year period.

The Plan's content will remain, in principle, fixed during fiscal 2019-2023, with a view to clarifying the Bank's objectives over the medium term and to ensuring proper assessment of its performance.

The Bank will conduct an interim review of the Plan in or around fiscal 2021, in order to enable the Bank to address any changes in the environment. It will flexibly revise the Plan as appropriate in response to any significant changes.

II. The Bank's Organizational Principles

The Bank's organizational principles constitute the set of fundamental values to be respected by the Bank, as the central bank of Japan. The officers and employees of the Bank must respect these principles at all times in the conduct of business operations. The Bank will secure public confidence through the appropriate conduct of its policies and business operations in accordance with the organizational principles listed below.

Public Interest
The Bank shall promote the public interest by fulfilling the core purposes stipulated in the Bank of Japan Act.³

Transparency
The Bank shall demonstrate proper accountability in its policies and business operations via its various external relationships.

Excellence
The Bank shall pursue excellence in the provision of central banking services, responding appropriately to changes in the environment.

Integrity
The Bank shall ensure integrity in the execution of duties by each officer and employee, requiring that they uphold high moral standards.

Effectiveness and Efficiency
The Bank shall make effective and efficient use of management resources in its conduct of business operations and organizational management.

III. Background and Management Guidelines

Turning to the environment surrounding central banks, economic and financial globalization has continued. Meanwhile, innovation and application of information technology (IT) such as digitalization have accelerated, and this has started to produce wide-ranging and diverse effects on economic and financial activities. In Japan, the economic and financial impact of structural social changes such as the declining and aging of the population has been increasing. In the wider context of the global economy and society, Japan is expected to address the Sustainable Development Goals (SDGs) adopted in 2015 at the United Nations General Assembly. These conditions present central banks with an increasingly wide range of challenges, and it has become ever more important for them to respond appropriately to changes in the environment.

Based on the above understanding, in order to properly perform its role as the central bank of Japan, the Bank has set the following three management guidelines for the Plan.

A. Work Cohesively to Fulfill Its Missions

The Bank's missions are to achieve price stability and to ensure the stability of the financial system. To achieve price stability, the Bank has set the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI). It will continue to work cohesively to fulfill these missions, with its officers and employees sharing the understanding that doing so promotes the public interest. In this regard, it is important for the Bank to communicate to the public its policies and business operations in a readily understandable way and to listen carefully to outside opinion. Recognizing this, the Bank will further enhance its communication while expanding its relationships both inside and outside Japan.

B. Enhance Flexibility in Responding to a Changing Environment

The environment surrounding central banks has been subject to significant change, and thus it has become important for them to enhance their flexibility in responding to these changes. To this end, the Bank will reinforce its operational arrangements for responding to such changes through initiatives including continuously reviewing and revising its business operations, raising operational efficiency, and making effective use of management resources. It will also secure the staff needed to effectively execute its business operations and organizational management by fostering human resources with a high degree of central banking expertise while also promoting diversity in the workplace. With this in mind, the Bank will cultivate a workplace environment favorable to improving the productivity of business operations and conducive to varied and flexible working arrangements, so that each employee can realize their full potential.

C. Execute Business Operations with Stability and Integrity

The Bank's missions are fulfilled through the execution of a wide range of central banking operations; the stability and integrity with which it executes these operations are what underpin public confidence in the Bank. Meanwhile, central banks have been facing, and are expected to continue to face, an increasingly wide range of challenges. Given these considerations, the Bank will ensure the stable execution of business operations by managing its operational risks properly while maintaining and further enhancing the operational reliability and individual expertise of its employees, which have been cultivated through long years of workplace experience. It will also continue to secure the complete integrity with which its officers and employees execute their duties.

IV. Challenges Accompanying IT Advances

The Bank will pursue its strategic objectives for business operations and organizational management, in accordance with the organizational principles that constitute the Bank's fundamental values, and the management guidelines that indicate the priorities of the Plan. In a situation where advances in IT have started to produce wide-ranging and diverse effects on economic and financial activities, it is highly important for the Bank to address the accompanying challenges in conducting both business operations and organizational management.

While considering from a medium- to long-term perspective how the growing impact of advances in IT will affect the Bank's business operations and the conditions at counterparties such as financial institutions, the Bank will proactively address any new challenges that arise and make all necessary operational adjustments. With regard to organizational management, the Bank, putting an emphasis on further use of IT, will tackle a wide range of tasks to improve operational efficiency, reduce operational risks, and use management resources effectively throughout the five-year period of the Plan. The Bank will also coordinate its efforts with the initiatives of the government and private sector in utilizing IT.

V. Strategic Objectives for Business Operations

The Bank will focus on the following strategic objectives for its business operations.

A. Plan and Formulate Monetary Policy Measures That Facilitate Policy Conduct

On its way to achieving sustainable growth with price stability, Japan's economy is expected to experience various changes in economic and financial conditions, including the impact of advances in IT.

With a view to responding appropriately to such changes and providing a firm underpinning for the conduct of monetary policy, the Bank will carry out the requisite research and analysis on economic and financial conditions at home and abroad from multiple perspectives.

Based on such multi-perspective analysis of the efficacy and impacts of monetary policy, the Bank will plan and formulate monetary policy measures flexibly. In addition, it will work to have the necessary operational arrangements in place so that market operations are conducted properly, in line with monetary policy decisions.

B. Ensure the Stability and Improve the Functioning of the Financial System

It is essential to ensure the stability and improve the functioning of the financial system in order to provide support from the financial side for Japan's economy to strengthen its growth potential.

In this regard, the Bank will appropriately plan, formulate, and execute business operations such as the selection of financial institutions that can hold current accounts at the Bank and the provision of loans.

The Bank, through on-site examinations and off-site monitoring, will also thoroughly assess business conditions at individual financial institutions in terms of their business environments, business strategies and operations, risk management, profitability, and capital bases, while considering the impacts of demographic changes and advances in IT. In particular, due attention will be paid to structural issues affecting their profits and to changes in their risk profiles accompanying developments in their business operations at home and abroad. Based on its assessments, the Bank, while utilizing IT, will identify and share issues of managerial concern with financial institutions and provide support as they make necessary improvements.

In planning and formulating financial system policy measures, the Bank will continue to place importance on taking a macroprudential perspective. As a prerequisite for this, it will enhance its research and analysis on the stability and functioning of the financial system as a whole, taking into consideration, for example, the diversification of financial service providers.

Meanwhile, in order to ensure financial system stability, the Bank will stand ready to act effectively as the lender of last resort for individual financial institutions and financial markets if necessary.

The Bank will address these objectives in due cooperation with relevant parties.

C. Enhance Payment and Settlement Services and Reinforce Market Infrastructures

The Bank will enhance Japan's payment and settlement services in response to the diversification of payment and settlement needs and financial globalization while maintaining an accurate grasp of environmental changes such as the spread of new financial and settlement services and operational changes at financial institutions. From this perspective, the Bank, as a central bank, will actively contribute to discussions and initiatives regarding new possibilities and challenges accompanying IT advances through close communication with a wide range of relevant service providers at home and abroad.

Regarding its payment and settlement services, the Bank will promote initiatives to realize payment and settlement for cross-border transactions in yen or Japanese government bonds by making effective use of the Bank of Japan Financial Network System (BOJ-NET). It will also proceed with wide-ranging deliberations on the applicability of newly developed IT to its payment and settlement infrastructure.

Meanwhile, the Bank will conduct appropriate oversight of financial market infrastructures, while considering changes in the environment.

The Bank will also work actively to reinforce financial market infrastructures in Japan to reduce settlement risk and strengthen market functioning, while giving due consideration to international developments and working in close cooperation with market participants.

D. Conduct Stable and Efficient Central Banking Operations

The Bank will work to secure confidence in the use of banknotes and coins while employing new technology. In this regard, it will conduct business operations such as the receipt and payment of cash and the examination of banknotes and coins in a precise and stable manner. In addition, the Bank will, in cooperation with relevant institutions, strengthen the monitoring of the cleanliness of banknotes in circulation and enhance its efforts to address counterfeiting.

The Bank will also maintain an accurate grasp of trends in cash circulation and improve the stability and efficiency of operational frameworks based on the information gathered.

With regard to banking operations, the Bank will, on a daily basis, continue to settle financial transactions involving current account deposits that financial institutions hold at the Bank and conduct market operations, implementing all of these in an accurate and stable manner. As for treasury funds and Japanese government securities (JGSs), the Bank will carry out a wide range of services with precision.

For both banking operations and services relating to treasury funds and JGSs, the Bank will continuously assess the stability and efficiency of its operational and other frameworks, while taking due account of, for example, trend changes in workloads and developments in the environment surrounding counterparties.

E. Contribute to International Finance amid Globalization

Amid further globalization and continuing growth in business and financial transactions between Japanese institutions and counterparties located in Asia, economic and financial stability around the globe, particularly in Asia, has become ever more crucial to Japan's economy.

Based on this recognition, the Bank will play its due part as a central bank in ensuring the stability of the international currency system, in cooperation with relevant authorities at home and abroad. It will also play a leadership role at many different international meetings, while paying appropriate attention to Japan's stance. Furthermore, in support of efforts to ensure economic and financial stability in Asia, the Bank will, among other initiatives, further strengthen monetary cooperation and technical assistance work in the region.

F. Contribute to Regional Economic and Financial Environments

Making due use of the functions available at its head office, branches, and local offices in activities such as providing appropriate central banking services in each region of the country, the Bank will contribute to regional economic and financial environments, with a view to supporting sustainable development.

Regarding central banking services, the Bank will aim to ensure that it can conduct its business operations in a stable manner even at times of natural disasters. It will maintain an accurate grasp of regional economic and financial conditions and of region-specific challenges through close communication with local financial institutions, firms, and economic organizations. At the same time, the Bank will provide careful explanations of (1) its view of Japanese and overseas economic and financial conditions and (2) the thinking behind its policies and business operations. It will make active use of information gained through such efforts in conducting monetary policy and business operations.

G. Strengthen External Communication

With a view to ensuring broad public confidence, the Bank will clearly and accessibly communicate its conduct of monetary policy and business operations not only to financial professionals but also to the general public at home and abroad.

Aiming to better grasp public opinion as well as public needs regarding its policies and business operations, the Bank will further strengthen its communication with financial institutions closely involved in its conduct of policies and business operations, and will build and strengthen relationships with people, firms, and economic organizations across a wide range of fields.

Taking the above matters into consideration, the Bank will work to achieve multilateral and effective communication by making use of various communication platforms, including its website. It will also aim to enhance the content of in-house tours of its head office and branches.

The Bank will publish the findings from its research and analysis in effective ways. It will also appropriately compile and release statistics, mainly with a view to improving their user-friendliness and responding to changes in Japan's economic and industrial structure.

In addition to the above efforts, the Bank, in cooperation with relevant parties, will work to support the activities of the Central Council for Financial Services Information and associated committees to promote financial literacy among the public.

VI. Strategic Objectives for Organizational Management

A. Organizational Management

The Bank will focus on the following strategic objectives for its organizational management and all sections of its head office, branches, and local offices will coordinate their efforts to achieve them.

1. Execute Business Operations Flexibly and Secure Requisite Staff

In view of the increasingly wide range of challenges facing central banks and the need to be able to respond flexibly to changes in the environment, the Bank will enhance its capability in planning business operations by accumulating a high degree of central banking expertise as well as maintaining and further enhancing the individual staff expertise cultivated through long years of workplace experience. It will revise and restructure its business processes to make full use of IT and work actively to enhance efficiency and stability in its business operations via computerization. Through these efforts, the Bank will further increase its effective use of management resources.

The Bank will secure the staff -- that is, individuals possessing a high degree of central banking expertise -- that it requires for executing its business operations and organizational management. At the same time, it will continue to foster employees' ability to tackle new tasks and to excel in international arenas, while taking into consideration changes in working arrangements. In addition, the Bank will further promote diversity in the workplace by, for example, improving the inclusion of women and senior employees and expanding the opportunities available to them. It will also steadily realize varied and flexible working arrangements to further improve the work-life balance and well-being of its employees. Through these efforts, the Bank will continue to foster a workplace environment in which diverse employees can realize their full potential.

2. Manage Operational Risks Appropriately

In order to maintain public confidence, it is important for the Bank to continue to execute all business operations with precision and deliberation. To this end, it will work cohesively to manage operational risks effectively, giving due consideration to changes in the composition of its workforce and in working arrangements. In doing so, the Bank will promote the reduction of operational risks and efficiency of risk management by making active use of IT.

In managing operational risks, it is essential for the Bank to ensure that its officers and employees execute their duties with integrity. To this end, the Bank will continue to work to ensure strict compliance with accepted social and ethical standards and to promote the appropriate management of information security.

3. Strengthen Business Continuity Arrangements

Based on its experience following the Great East Japan Earthquake, the Kumamoto Earthquake, and a succession of other natural disasters, as well as the government's reappraisal of potential damage scenarios for large-scale earthquakes such as those directly hitting Tokyo or occurring in the Nankai Trough area, the Bank will further reinforce its business continuity arrangements through the effective use of its management resources.

B. Management Resources

1. Number of Employees

In order to carry out the strategic objectives stated in the Plan, the Bank will work to secure the necessary employee numbers and to increase the efficiency of its overall business operations. The ceiling on the number of full-time employees for each fiscal year will be decided and made public based on this basic understanding.

2. Expense Budget

In order to carry out the strategic objectives stated in the Plan, the Bank will secure the necessary budget and achieve more streamlined overall spending. The budget for each fiscal year will be decided and made public based on this basic understanding.

VII. Performance Reviews of the Plan

With a view to (1) steadily carrying out the strategic objectives for business operations and organizational management stated in the Plan and (2) reviewing and revising as necessary the allocation of management resources, the Bank will conduct and make public performance reviews of measures taken under the Plan every fiscal year. In addition, it will conduct a comprehensive review of its performance over the entire period of the Plan.

Notes:

• 1.Decided by the Policy Board on March 22, 2019.
• 2.Following The Bank of Japan's Strategic Priorities for Fiscal 2014-2018 ending in March 2019, the Bank formulated this statement for the five-year period starting April 2019.
• 3.The Bank of Japan Act determines the Bank's core purposes as follows: Article 1 stipulates that the Bank is required to issue banknotes, carry out currency and monetary control, and maintain the stability of the financial system, and Article 2 stipulates that currency and monetary control shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy.

Attachment 1 for Appendix 2: The Bank of Japan's Budget for Expenses for Fiscal 2022

This section is not included in the HTML version of the report.

Attachment 2 for Appendix 2: The Ceiling on the Number of Full-Time Employees of the Bank of Japan for Fiscal 2022

This section is not included in the HTML version of the report.

Appendix 3: Interim Review of Medium-Term Strategic Plan (Fiscal 2019-2023)¹

I. Introduction

The Bank of Japan formulated the Medium-Term Strategic Plan (Fiscal 2019-2023) and released it in March 2019. Performance reviews of measures taken under the Plan have been conducted every subsequent fiscal year and the results made public in the Gyoumu Gaikyo Sho (Outline of Business Operations, available only in Japanese).

The Plan states that the Bank shall conduct an interim review of the Plan in or around fiscal 2021, in order to enable the Bank to address any changes in the environment, and the Bank has duly done so. This document summarizes the Bank's accomplishments in the first three fiscal years of the Plan and clarifies its strategy for the remaining period, particularly for the main challenges the Bank has faced in conducting business operations and organizational management since the formulation of the Plan.

II. Developments in the External Environment and the Bank's Responses

The Plan describes the environment surrounding central banks as follows. Innovation and application of information technology (IT) such as digitalization have accelerated, and this has started to have wide-ranging and diverse effects on economic and financial activities. In the broader context of the global economy and society, Japan is expected to address the Sustainable Development Goals (SDGs). In recent years, central banks have commonly faced mounting expectations to take further action concerning central bank digital currencies (CBDC) and climate change. These developments can be considered as concrete progress in the environment described in the Plan. Under these circumstances, the Bank clarified its stance regarding these challenges in The Bank of Japan's Approach to Central Bank Digital Currency (October 2020) and The Bank of Japan's Strategy on Climate Change (July 2021), and has made steady progress accordingly. As a response to the new challenges to the Bank's business operations that accompany advances in digitalization, the Bank has been making active use of alternative data, such as high-frequency data and granular data, in research and analysis on economic and financial conditions at home and abroad, amid the increasing availability of such data.

The novel coronavirus (COVID-19) pandemic, which began after the formulation of the Plan, is another challenge facing central banks. Since 2020, the Bank has implemented measures to prevent the spread of COVID-19 and has done its utmost to continue providing essential central banking services to ensure the stability of people's daily lives and economic activities as a designated public institution under the Act on Special Measures for Pandemic Influenza and New Infectious Diseases Preparedness and Response. In this process, the Bank has made use of its expertise in strengthening business continuity arrangements, which it has accumulated steadily over the past years, and also of the experience of addressing the challenges accompanying IT advances as laid out in the Plan.

III. Looking Forward to the Remaining Period

The Bank will continue to perform appropriately its role as the central bank of Japan, addressing a wide range of strategic objectives for its business operations and organizational management under the Plan in fiscal 2022 and beyond. The Bank will give due consideration to the following matters given changes in the environment that have occurred since the formulation of the Plan.

The Bank will proceed with the CBDC project in line with the approach it published in October 2020. Specifically, for the experiments that it started in fiscal 2021, the Bank will move forward to Proof of Concept (PoC) Phase 2 in April 2022, after completing Phase 1, to implement additional functions of CBDC and test their feasibility. Based on these experiments, if the Bank judges it necessary to step things up further, it will also consider a pilot program that involves private payment service providers and end users. It will also proceed to explore institutional arrangements for CBDC, while closely exchanging views with stakeholders at home and abroad regarding, for example, cooperation and role-sharing arrangements between a central bank and private payment service providers and the impact on the financial system.

In addition to the above, the Bank will tackle a wide range of tasks in its response to progress in digitalization, taking into consideration the impact on its business operations. The Bank will, for example, steadily promote efficiency in business operations between the Bank and counterparties such as financial institutions and further advance the use of alternative data in its research and analysis.

The Bank will continue to address climate change in line with its strategy released in July 2021. Specific measures are laid out in the strategy in the areas of monetary policy, financial system, research, international finance, and the Bank's business operations and external communications. The Bank will continue to make progress on each measure in coordination with relevant departments within the Bank through the Climate Coordination Hub. In the Gyoumu Gaikyo Sho (Outline of Business Operations) for fiscal 2021, which is scheduled for publication in May 2022, the Bank will provide explanations of its climate-related efforts including disclosures that take into account the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

With regard to responses to COVID-19, the course of which continues to warrant attention, the Bank will continue to conduct its business operations as a designated public institution, while continuing to implement measures to prevent the spread of the virus. Making use of the expertise it has gained through the experience of addressing COVID-19, the Bank will also take the initiative to promote business operations and organizational management suitable for the post-pandemic era, such as enhancing the efficiency of business operations using IT and further improvements in the flexibility of working arrangements.

The Bank positions the above matters as complements to the Plan for the remaining period, namely, for fiscal 2022 and 2023.

Note:

• 1.Decided by the Policy Board on March 25, 2022.

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Information

I. Bank of Japan Website

Provides various kinds of information, including monetary policy releases, speeches and statements, reports and research papers, financial and economic statistics, as well as general facts about the Bank.

• 

Bank of Japan FAQs

Provides helpful answers to frequently asked questions on the Bank's functions and business operations as well as related topics. Continually updated to reflect changes.

BOJ from Home

Offers online opportunities to explore the tour route of the Main Building at the Bank's Head Office -- the oldest of its buildings and designated an Important Cultural Property -- through contents including a video showing the tour's "must-sees" and an interactive 3-D/virtual reality (VR) map.

• 
• 
• 

Virtual Tour

Introduces the Bank's business operations and history with photographs and explanatory notes.

• 
• 
• 

Introductory Video "The Bank of Japan in Our Daily Lives"

Explains the importance of maintaining people's confidence in the currency, as well as the Bank's policies and operations toward this end.

• 

PR Brochure "Bank of Japan: Its Functions and Organization"

Provides a concise and easy-to-follow overview of the Bank's functions and operations, as well as of its history and organizational structure.

• 
• 

BOJ Time-Series Data Search

Provides time-series statistical data released by the Bank for searching, downloading, and the drawing of graphs.

• 

II. Visiting the Bank of Japan

• Bank of Japan (Head Office)

  2-1-1 Nihonbashi-Hongokucho,
  Chuo-ku, Tokyo 103-0021, Japan
  Tel: +81-3-3279-1111

  A guide map for the Head Office is available on the "Location / Visiting the Bank" page on the Bank's website.

• 

• Bank of Japan Currency Museum

  1-3-1 Nihonbashi-Hongokucho,
  Chuo-ku, Tokyo 103-0021, Japan
  Tel: +81-3-3277-3037

  Looks to provide visitors with opportunities to think about the history and role of currency and its relation to culture and society through the Museum's collection of coins and notes, as well as related materials and research findings.

• 

• Bank of Japan Otaru Museum

  1-11-16 Ironai, Otaru, Hokkaido 047-0031, Japan

  Opened in May 2003, in what was previously the Otaru Branch building. Provides displays on the Bank's history, operations, and the development of Otaru City.

• 

III. Publications and Reports

About the Bank

About Monetary Policy

Reports & Research Papers

Data Compiled in Statistical Publications

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