The continuation of price declines, albeit moderate ones, for a protracted period has deprived Japan’s economy of vitality. In a state of deflation, the holding of cash or deposits will become a relatively better investment. In fact, cash and deposits held by Japanese firms have reached 230 trillion yen, close to 50 percent of nominal GDP.
Having said all this, I cannot but finish with an optimistic observation. The banking industry has shown ingenuity in coping with many challenges. This is mirrored in the diversification of its activities.