In 1986, the derivatives markets were still nascent and securitization had just begun to spread outside the mortgage markets in the United States. At that time, a task force of central bankers, the precursor to today’s Committee of the Global Financial System, which reports to the Global Economy Meeting of 31 central bank governors, published a volume titled Recent Innovations in International Banking.1 The report was notable for being among the first to describe what was then a set of new financial instruments, such as over-thecounter derivatives and the expanded use of financial options. The study noted the tremendous momentum behind the 1980s wave of financial innovation, the likelihood of those forces continuing, and the changes already occurring in the financial system, especially the shift of financial activities from traditional banking markets to securities and derivatives markets. The really noteworthy aspect of the report is the study group’s effort to identify – really, anticipate – the risks and concerns that could emerge in the transforming financial system. In a section that anticipates current policy language with the cutting-edge title “Macro-prudential policy”, the report enumerates these concerns: •  The risk that credit vigilance would decline in the financial system, and with it, overall credit quality. •  The potential that the transformed financial system could encourage and enable leverage. •  The risk of sudden loss of liquidity as markets come under pressure, especially because the banking system would no longer be capable of backstopping the nonbank financial sector and the broader private sector.
I Page 6 of 8  talked a bit on this topic last year, but for this year, I would like to offer a different perspective of why it is still a good place for Japanese firms to be in and invest. The first point we can probably all agree on is that ASEAN is a good place to be. A lot of geopolitical turmoil today probably emphasizes that it is good to be in a place like ASEAN. If you grouped all the ten economies as one economy, ASEAN would be the 4th or the 5th largest economy in the world, depending on whether you use PPP or market exchange rates. It is a region that is integrating and linking together in real terms, not just the rhetoric in terms of diplomatic cooperation. Linkages are rapidly increasing as we have seen about a three-fold expansion of the intra-ASEAN trade over the past 20 years. ASEAN also remains attractive in terms of investment since it accounted for an increased share of global foreign direct investment, about 5 percent five years ago but increased to about 14 percent in 2020. I think that all of you would probably agree that ASEAN is a good place to be. Thailand admittedly is not the largest market in ASEAN as we are about half the size of Indonesia. We are also no longer the fastest growing economy by any stretch of the imagination as Vietnam is growing much faster than we are.