On June 8, the Bank of Japan released the closing remarks of Mr. Haruhiko Kuroda, Governor of the Bank of Japan, at the G20 High-level Seminar on Financial Innovation entitled “Our Future in the Digital Age.”

According to information disclosed, the first session explored potential benefits and risks arising from financial and technological innovation. The second session examined blockchain technology and laid out key factors for facilitating the sound expansion of decentralized financial ecosystems.

Governor Kuroda pointed out that while financial and technological innovation increases the functions of the financial system, it creates risks. He stated that a good clue for mitigating those risks would be to interpret financial and economic activities as interactions within a system as well as among multiple systems.

Using examples of portfolio insurance strategies on Black Monday and the recent global financial crisis, he stated: “Historically, the financial system has carried risk-amplifying mechanisms in an insidious manner that would pose serious threats to the system as a whole. People realized their mistakes only after unexpected disasters took place,” and analyzed that the modern financial system has repeated such experiences.

Governor Kuroda pointed out that “Innovative financial services and new entrants have begun to transform the structure of the financial system. We should reap the benefits of innovation, while carefully assessing the risks that build up unintentionally.” He has once again stressed the direction of promoting financial and technological innovation, while assessing risks.

*This article was written by Fisco