Moreover, Japan-China relations have already started to affect a number of areas and there is concern that they may have wider implications for Japan’s economy. Although global financial markets were unstable until this summer, since then, investors’ risk aversion triggered by the European debt problem has abated somewhat, partly owing to the fact that European authorities have carried out a range of policy measures.
Nevertheless, particular attention needs to be paid to developments in financial markets, as fiscal and economic structural reforms in Spain and Greece are still underway. II. Recent developments in Japan’s economy  Weakening economic activity I will now explain recent developments in Japan’s economy.