At the 2026 Bund Summit themed "Technology, Geopolitics and the Global Economy," held in Huangpu District, Shanghai from October 19 to 22, 2026, former Bank of Japan Governor Masaaki Shirakawa attended and participated in a roundtable discussion.
Shirakawa stated that central bank independence is currently being challenged and that central banks have been assigned too many tasks, largely because the problems facing our society and economy are extremely difficult and complex. As a result, central banks easily become targets of criticism from other parties.
He believes that to clarify the causes of this situation and to judge how much responsibility central banks themselves should bear, it is necessary to review the long history of how central banks obtained independence.
He further explained that the current system of central bank independence originated from the painful experience of high inflation in the 1970s and early 1980s. This gave rise to the idea that the goal of monetary policy is price stability, a task delegated to an independent central bank, and the inflation targeting framework is a manifestation of this idea. This framework worked well until about 20 years ago.
But just as inflation targeting was being hailed as a great success, the global financial crisis broke out. Looking back, inflation targeting at the time led people to form the notion that achieving price stability alone was sufficient to achieve macroeconomic stability. As a result, various forms of financial imbalance were often overlooked. Subsequently, central banks, worried about deflation or about interest rates falling near zero, implemented large-scale quantitative easing, and as a result, high inflation did indeed follow.
Reviewing this process, Shirakawa pointed out two lessons: first, we must pay attention to imbalances, because price stability alone may not capture them; at the same time, we must also achieve the right balance.
He further added that central banks vigorously implemented quantitative easing out of concern about deflation. The idea supporting this approach is the so-called "policy tool allocation principle." Policy should be allocated to corresponding objectives, meaning each policy tool should be used for the objective it serves most effectively.
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