but from economic liberalisation. they postulate that a flood of speculative capital first caused a real - estate bubble, which affected the rest of the economies when the bubble burst. the problem therefore was not a lack of openness but too much of it, too soon. they also suggest that as capital rushed out of asia, countries like taiwan and others still had sound fundamentals - budget surpluses, low inflation, high savings rates. some critics also maintain that the imf ’ s actions made a bad situation worse. draconian prescriptions, such as bank closures, budget cuts, higher interest rates and structural reforms intended to root out everything wrong with the asian approach to the economic policy, had an excessive deflationary effect. whether the imf ’ s actions were entirely appropriate in all instances during the asian crisis is a matter for another day, but the important characteristic distinguishing the asian crisis from other crises was the prominence of private financial institutions and other private enterprises as both creditors and debtors. as michel camdessus, former managing director of the imf, pointed out, a number of trends in the integration of capital markets stand out. these trends make the process more complex, and include the following : the domestic private sector is playing a far more important role in the economy of most countries. domestic financial and capital markets have sprung up in beijing and moscow and a host of other cities in the developing world. the foreign investment community is far more diverse, comprising direct investors, portfolio investors, banks and bondholders. the different types of investment have responded to globalisation in different ways and even during crisis periods flows of direct investment have in many instances not fallen steeply. it is too simple to conceive of nations as belonging to either the debtor or creditor group. there are powerful flows in many directions. the largest source of direct foreign investment in asia is, for example, asia itself. korea, hong kong, thailand and japan are all important sources of foreign investment within the region, and remain so even though some were at the heart of the asian crises. globalisation accelerates and spreads the international consequences of domestic policies. no country can escape the consequences of globalisation, and all countries are being called upon to ensure “ rigour and transparency in overall economic management ; banking and financial sector soundness ; reform of the institutions of the state in terms of seeking public sector efficiency, appropriate regulation, emphasis on the rule of law, independence of the judiciary ( and the central

outset, however, some voiced the opinion that it would have been better to first confirm incoming data, such as the results of various economic indicators due to be released in april. i voted for the policy changes at the march mpm, and i would like to explain my rationale for doing so. the first reason was that the conditions for changing policy had already been met. various conditions were in play. for example, looking at the distribution of the year - on - year rate of change in the price of individual items constituting the cpi, the shape of the distribution clearly differs from that at the time of policy changes in 2000 and 2006 ( chart 13 ). when the bank made policy changes in 2000 and 2006, the distribution was weighted to the left, indicating that a high proportion of items had a negative year - on - year rate of change. this shape suggests the possibility that the policy changes were taken in a situation where considerable deflationary pressure remained. by contrast, the price change distribution by item in the cpi at the time of the march 2024 policy changes was weighted to the right, indicating that an overwhelmingly high proportion of items had a positive year - on - year rate of change. this means that the current increase in cpi inflation is not driven by a limited increase in the price of specific items, but rather, the prices of many items together are increasing. the second reason for my vote pertains to the market's understanding of the policy decision. my concern about making policy changes at the march 2024 mpm was the possibility that the changes would lead market participants to form a dominant view that monetary policy had taken an abrupt shift toward tightening. if this happened, it would initially spark a negative reaction in financial markets. this would then spread to the real economy, causing the economy to deteriorate, and raising the likelihood that deflationary pressure would increase again. to avoid this situation, it was important for the bank to provide appropriate communication so that market participants would understand that, even if the bank made policy changes, it was only part of its efforts to achieve the price stability target, and that accommodative financial conditions would be maintained for the time being. fortunately, the short - term interest rate - - the main policy interest rate target following the march policy changes - - has remained at a very low level. given various sources such as anecdotal information, i feel that market participants have an adequate understanding of the bank's intention behind