such as the current account deficit, fiscal deficit, and high private - sector debt ) or those linked closely with global financial markets ( charts 9 through 11 ). the reversal was triggered by the change in foreign investors ’ views over the expected timing for the federal reserve to reduce the pace of its asset purchases, and the subsequent interest rate hike in the united states – in addition to the change in their views over the growth expectations for emerging economies. the see jaime caruana, “ ebbing global liquidity and monetary policy interactions, ” speech at the central bank of chile fifth summit meeting of central banks on inflation targeting : “ global liquidity, capital flows and policy coordination, ” bank for international settlements, 2013. see iwan j. azis, sabyasachi mitra, anthony baluga, and roselle dime, “ the threat of financial contagion to emerging asia ’ s local bond markets : spillovers from global crises, ” adb working paper series on regional economic integration, no. 106, asian development bank, 2013. bis central bankers ’ speeches accumulated large amount of capital inflows to these economies as well as a shift in global financial conditions also contributed to a shift in capital flow movements. in spite of reduced exposure to the double mismatches, emerging economies suffered from a reversal of capital inflows – mainly through a sudden decline in liquidity in the bond and foreign exchange markets. in may – august 2013 in particular, bond prices dropped and exchange rates depreciated sharply in some of these economies, while some also faced large declines in stock prices ( charts 12 through 14 ). in other words, the greater linkages with global financial markets through securities market financing might have made emerging economies more sensitive to movements in interest rates in advanced economies. some foreign investors tend to adjust their long positions relatively quickly by selling their holdings of securities when the volatility of interest rates rises suddenly. moreover, foreign investors, during periods of reduced liquidity, increasingly take short positions over exchange rates in order to hedge their positions over securities ; this may lead to a sudden depreciation of exchange rates without accompanying large - scale actual capital outflows. b. diverging economic performance in asian emerging economies capital inflows, together with expansionary fiscal policy and inadequate structural reforms, have in the end contributed to the deterioration in the current and fiscal account balances of some economies in the asean countries and south asia ( charts 9 and 10 ). since the reversal

, and reached below 2. 0 per cent in early september. recently, it has moved at a record low level of around 1. 95 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate was lowered by 0. 2 percentage points each in june, july and september and has again reached the record low level of 2. 5 per cent. in these circumstances, short - and long - term contracted interest rates for new loans and discounts ( up to july ) have moved at record low levels. on the stock exchange, the nikkei 225 stock average moved at around ¥20, 000 21, 000 between may and july 1997, but later declined, partly reflecting the fall in u. s. stock prices. it fell below ¥18, 000 in early september, and has recently been moving at around ¥18, 000. in the foreign exchange market, the yen appreciated to ¥110 to the u. s. dollar in the first half of june. however, the yen later reversed its course and depreciated, with some fluctuations, and has recently moved at around ¥120. meanwhile, the yen had also been appreciating against the deutsche mark since may, but recently depreciated somewhat to ¥67 - 69.