Importantly, as I will elaborate, stress testing adds a macroprudential dimension to our supervision by helping us evaluate the aggregate capital position of the largest banking firms as well as their individual capital levels.
Looking back to the late 1990s and 2000s, while Japan was suffering from deflation, other economies were performing quite well. With Alan Greenspan, sometimes called the “maestro,” at the helm of the Federal Reserve, the United States enjoyed a prolonged period of stable prices and high economic growth, and overcame several economic shocks such as the collapse of IT Bubble in the early 2000s.