In fact, the total amount of currency and deposits held by Japanese firms has reached 230 trillion yen, equivalent to nearly 50 percent of the nominal GDP. The protracted deflation has created an environment in which maintaining the status quo is better than embarking on new challenges through investment, and this has deprived Japan of economic vigor.
With regard to the global economic conjuncture, I don’t have much to add to the views expressed by my colleagues. In light of the persistent tensions in financial markets and slowing growth in the advanced economies, we need to keep a close watch on how the negative feedback loop between financial markets, asset prices and the real economy will play out going forward.