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.
In Pillar 2 of the framework, we need to make sure that banks perform adequate stress tests and hold capital for uncertainties related to exposures coming back to the balance sheet for legal, reputational or liquidity reasons.