At present, many countries design their institutions and policy frameworks with the intent to work to identify financial imbalances as early as possible and take action, although there is some degree of difference among countries. Third, it is also difficult to find a way to prevent the leakage of policy effects. Regulatory arbitrage is one example.
Even though regulated banks reduce their lending in response to certain measures, policy effects could be offset if reduced lending amounts are provided instead by non-regulated financial institutions such as shadow banking institutions. The same was true for Japan’s quantitative ceiling on banks’ real estate loans, which I mentioned earlier.