If the economy deteriorates, it becomes more difficult to make progress with fiscal consolidation, which is the starting point of the problem. It should be recognized that the problem entails the risk that the adverse feedback loop among the fiscal situation, the financial system, and economic activity will intensify further.
Japan’s financial environment continues to ease Fortunately, so far in Japan, unlike in the United States and Europe, the markets from which banks and firms raise their funds remain in a stable condition, without strains (Charts 3 and 4). Looking at firms’ funding conditions, they have actually continued to ease.