major features the most prominent feature of the new checklist is the change in categorization. in view of the transformation of risk management emphasis from heightening recognition of risks in the former checklist to the recent actual control of risks, the overall structure of the checklist has been altered from the eight categories by type of risk in the former checklist ( credit risk, interest rate risk, foreign exchange risk, liquidity risk, operations risk, electronic data processing [ edp ] risk, systemic risk, and management risk ) to four categories by type of operation ( management and internal controls, lending operations, market operations and asset and liability management [ alm ], and business operations and edp ). the checklist has also been revised to reflect the important points in risk management acquired during the bank ’ s past on - site examinations, while giving due consideration to the various reports and guidelines of international organizations and foreign financial authorities, and to trading practices in japan. concretely, the section on management and internal controls emphasizes basic management policy and strategy concerning risk management, while including items regarding legal compliance and countermeasures against disasters. this section is given the highest priority in the new checklist. second, against the background of the increase in nonperforming assets accompanying the bursting of the “ bubble ” economy, the section on lending operations has been strengthened to reflect points important in the evaluation of creditworthiness and avoidance of credit concentration. at the same time, this section promotes comprehensive management of domestic, overseas, on - balance - sheet, and off - balance - sheet transactions, and includes general remarks foreseeing the introduction of a loan grading and review system, further contributing to the continued enhancement of risk management as a whole. third, the section on market operations and alm has been expanded in content, as this section is the most strongly influenced by the progress in financial liberalization and innovation, namely, the rapid growth in derivatives transactions and the greater impact of alm skills on profit / loss of financial institutions. this section incorporates numerous concepts from the checklist for risk management on derivatives transactions, which was compiled and issued in april 1995, and reflects new risk management techniques and lessons learned from some of the recent financial incidents. fourth, with the development of edp at financial institutions, more weight has been put on edp in the section on business operations and edp. furthermore, to reinforce the importance of the accuracy of individual offices ’ work, this section has given as comprehensive a

adoption of advances in production technology and resource management enhanced competitiveness, along with the accumulation of human resources. the second mechanism that i want to highlight is the autonomous growth in domestic demand spurred by the development of export industries. as export industries grew, a large proportion of the labor force moved from the rural agricultural sector to take up employment in urban factory sites. as income level rose with economic expansion, the number of middleincome households gradually increased, which underpinned the strong growth in consumption. as a result, the ground was laid for an autonomous expansion of domestic demand, which, along with exports, underlined asian economic growth. as evidenced in the recent increase in direct investment in the non - manufacturing sector, asia is now recognized not only as “ the factory of the world, ” but is also gaining prominence as the world ’ s biggest “ consumer base. ” middle - income trap the question here is whether asia can maintain its position as the world growth center in the future. according to long - term forecasts by international organizations and private - sector economists, asia is expected to continue to enjoy relatively high growth and thus its share in the global gdp will increase steadily. these forecasts depend largely on the implicit assumption that asia will maintain its growth momentum without falling into the “ middle income trap. ” the so - called follower group economies can move from low - income to middle - income status by continuing on the road to high growth, leveraging their abundant resources and importing technology. this catch - upstyle growth will be short - lived though, unless it is underpinned by the gradual sophistication of the industrial structure. history shows that many economies have faced difficulties in advancing beyond the status of a middle - income economy. this is known as the “ middleincome trap. ” a low - income economy can strengthen export competitiveness in the process of reaching middle - income status by using the abundant inflow of human resources from the bis central bankers ’ speeches rural agricultural sector, which puts downward pressure on wages. however, wages tend to rise after passing what is called “ the lewisian turning point ” in development economics. this in turn reduces corporate profits and weakens export competitiveness, which together lead to sluggish economic growth. several asian economies have taken the world by surprise by achieving the “ miracle ” of actually escaping the shackles of the middle - income trap ( chart 3 ). japan reached the lewisian turning point in the 1960s, but then marked