Based on these findings, it may be said that the decline in the potential growth rate in Japan since the 1990s exerted downward pressure on prices by triggering a decline in demand exceeding that in the potential growth rate, which in turn lowered the expected growth rate at the time, which then negatively affected medium- to long-term inflation expectations.
Despite these indicators, there continues to be serious risks to financial stability in these economies, arising from the withdrawal of government support, continued write-downs to compensate for further asset deterioration and funding pressures, as institutions seek to reduce leverage and raise capital and liquidity buffers. In these advanced economies, debate is still raging on the long term financial sector outlook.