It is widely agreed that Japan should further strengthen its financial system and carry out other structured reforms to provide further flexibility in the economy. Further flexibility in exchange rate policies is desirable for the emerging market economies. Any attempt by EMEs to intervene excessively and sterilize their forex reserves to maintain their competitiveness will further delay the adjustment process.
To add a further layer of complexity, the appropriate analytical framework also should recognise the incomplete nature of the single market in financial services, with banking union and capital markets union in Europe at varying stages of development and differences in supervisory systems across banks, non-bank intermediaries and financial markets.