masaaki shirakawa : finance in asia – banking business and capital markets keynote address by mr masaaki shirakawa, governor of the bank of japan, at the dinner reception, hosted by the japan securities dealers association, preceding the international conference, tokyo, 9 february 2012. * i. * * introduction thank you very much. it is my pleasure to speak at this dinner reception hosted by the japan securities dealers association that precedes tomorrow ’ s international conference. the conference, entitled “ asian market integration and financial innovation ”, brings together senior officials from such international forums as the international organization of securities commissions ( iosco ) and the international accounting standards board ( iasb ), as well as a number of capital market experts in asia. i look forward to lively discussions tomorrow on the future evolution of asian financial and capital markets, the direction of the strategic reshaping of financial infrastructures in asia, and other important subjects. since the lehman crisis in 2008, major central banks have undertaken a variety of policy measures that transcend the conventional boundaries of central banking. in this process, central banks have become more closely involved in capital markets. for example, the bank of japan has been buying risk assets such as corporate bonds, exchange - traded funds ( etfs ), and domestic real estate investment trusts ( j - reits ). these purchase programs are truly extraordinary in central bank history. given that the global financial landscape, including policy responses, is undergoing profound changes, today i would like to share my views on financial and capital markets in asia, with a principal focus on the interplay between banking business and capital market development. ii. current economic conditions in asia let me start with the recent economic and financial developments in asia. we are now entering the third year since the european sovereign debt problem surfaced in greece. without doubt, the way the debt problem in europe will play out remains a key factor shaping the near - term outlook for the global economy. concurrently, for the past several years emerging economies have been the propelling force behind global economic growth. among them, asian countries have displayed particularly robust growth, driven mainly by china and india. in its latest projections, the international monetary fund expects the global economy to grow by 3. 3 percent this year, with the 27 countries of developing asia contributing nearly 60 percent of that. despite the concerns over the global economic outlook, there are reasons to believe that asian economies are better placed to sustain solid growth. most fundamental are their rich human

a number of projects are underway to nurture regional corporate bond markets, and the bank of japan has participated actively in some of these initiatives, including the successful launch of the for more details, see asian development outlook 2010 update : the future of growth in asia, asian development bank, 2010. for more details, see “ weathering financial crises : bond markets in asia and the pacific ”, bis paper no. 63, bank for international settlements, 2012. bis central bankers ’ speeches asian bond fund ( abf ). but the saving - and - investment balance in asia has remained lopsided since the asian financial crisis. in other words, asia has excess savings, with the region ’ s investment still below the levels seen prior to the asian crisis. development of corporate bond markets in asia is one effective way to align savings with investment within the region. also, given the aging trends in asia, well - developed corporate bond markets would offer the additional merit of creating long - term investable assets for such institutional investors as pension funds and life insurance companies. with regard to capital markets, i would also like to touch briefly on the subject of asian stock markets because stock markets, together with bond markets, are a vital part of capital markets. asian stock markets have grown exponentially in recent years. according to statistics from the world federation of exchanges, equity finance in the asia - pacific region accounted for 46 percent of the world total last year. during the same period, half of all global initial public offerings took place in the asia - pacific region. asia ’ s stock market capitalization accounts for 31 percent of the global total, indicating that the pace of recovery in stock markets following the lehman crisis is fastest in this part of the world ( chart 3 ). it seems that a virtuous cycle is operating in asian stock markets, in which larger trading volumes and higher market liquidity reinforce each other, prompting both regional and foreign firms to seek funding in asia. last year, for example, we saw glencore, one of the world ’ s leading commodities traders, listed in both london and hong kong. this event points to the vitality of asian stock markets. by making its stock markets more attractive as funding venues, asia can open up its plentiful savings to globally active firms. the flip side of this is that asian investors will have greater opportunities to invest abroad. to achieve further development of asian capital markets based on their interactions with global firms, it seems necessary to harmonize market infrastructures