Focus has been given to maintaining a sound and viable banking system and the development of the domestic capital market. Efforts in this area have begun to show positive results. Banks’ balance sheets are gradually recovering from the large burden of bad loans while the local bond market has received the initial shot from the reforms that include the now operational fixed income exchange.
This reduced the settlement risk in the secondary market for JGBs as a whole and prevented a chain reaction of default in JGB settlement. We should welcome the fact that a worst-case scenario was avoided in Japanese financial markets, as I have just described.