Second, the subprime-related losses of Japanese financial institutions are limited compared to those of U.S. and European counterparts. As a result, Japanese financial markets continue to function well, though there  2  This seemingly overcautious behavior is not irrational.
Rational investors, who are, say, 95% confident that these financial institutions' advice is true, but think that there is a 5 % chance that the institutions might be utterly incompetent and their advice might be wrong, always consider the worst outcome and try to improve it, rather than to maximize their profits taking the institutions' advice for granted.