There was a risk that the downturn in the economy could create a vicious circle, where weakening household and business finances and declining asset prices hampered any recovery. And although we had confidence in the resilience of our banking system, the impact could have been worsened if financial institutions became overly cautious and restricted access to credit to households and businesses.
However, as Japan's past experience suggests, it is extremely difficult to accurately gauge, on a real-time basis, the size of impaired assets and a capital shortage when a negative interaction is at work in the financial and economic systems.