Indeed, the consequences of this process include portfolio dollarization; fiscal dominance; obstacles to develop a long-term credit market; and the marked negative correlation between changes in retail deposits and foreign exchange fluctuations. These factors, which undermined the power of some traditional monetary policy instruments, have played a key role in the design of our current monetary and financial system.
Stock prices declined from late July as foreign institutional investors sold stocks in line with a decline in U.S. and European stock prices, and are recently moving around 9,500-10,000 yen. In the foreign exchange market, the yen rose to 115-116 yen in mid-July reflecting the overall downtrend in the U.S. dollar, and is currently fluctuating at around 120 yen to the U.S. dollar.