In Europe, there are concerns that, in 2011, the effects of economic stimulus measures could wane with the implementation of fiscal austerity programs. In addition, concerns over the sovereign risk of some European countries might have adverse effects on economic activity through a rise in long-term interest rates and a deterioration in market sentiment.
Third, turning to the situation in Japan, if uncertainty about the outlook for overseas economies heightens further and the foreign exchange and stock markets become unstable, this might lower firms’ medium- to long-term growth expectations and lead to a deterioration in household sentiment, and economic activity in turn might be weaker than expected.