Looking back on the spring of 2008, I still remember my hesitation to embrace a view expressed during a meeting between G-7 finance ministers, central bank governors, and major financial institutions – held on the day after my appointment – that the worst might be over. In fact, one of the largest U.S. investment banks, Lehman Brothers, went bankrupt in September of that year.
This led to extremely high stress levels in international financial markets, and global economic activity fell off the cliff. The last months of 2009 saw the European debt crisis, which was to subsequently intensify in waves, erupt in Greece. The financial crises that occurred around the globe strengthened the risk-averse attitude of investors, leading to heightened demand for the yen as a safe haven.