Japan’s dependence on the banking system, a system that has largely ceased to function, represents a further constraint on the transmission of monetary policy in that country. Thus, it seems appropriate for Japan to continue its efforts to develop deeper and more liquid capital markets.
Demand for business and consumer credit in the United States is stronger than in Japan, and corporate balance sheets are in better shape. The continued rapid pace of technological innovation is likely to create expanding opportunities for profitable investment and thereby strengthen further the demand for credit.