in the interbank funding market for foreign currencies. the flexibility that central banks have to act when necessary, and to introduce measures as necessary, is a powerful framework in times of crisis. however, they are not permanent in nature and do not resolve the possible risks arising from global imbalances and volatile capital flows. the liquidity that central banks provide can be quite effective in alleviating the pain of the adjustment process, or temporarily stabilizing the situation in times of stress. the key is to use this temporary respite to initiate a positive cycle of fundamental reforms which will provide the foundation for strong, sustainable and balanced growth. i have presented what i believe to be three lessons from the global financial crisis. how could they be seen from both an asian and global perspective? first, putting one ’ s house in order does remain a key objective for all countries. sound macro - economic policies will continue to be of utmost importance. second, in putting one ’ s house in order, policy - makers need to be conscious of the cross - border spillover effects and the ensuing feedback effects on their own economies. such elements in their totality will need to be internalized within the decision - making process. such considerations will be important not only for macro - economic policy, but also macro - and micro - prudential policies. prudential rules to stabilize a financial system in one jurisdiction could push business across borders or influence global capital flows. furthermore, extra - territorial application of domestic rules, in spite of its good intentions, could have unintended negative consequences for the stability of financial systems of other countries. third, regional frameworks such as the chiang mai initiative can play a vital role in maintaining financial stability in the region. it reflects the unique characteristics of the region and provides strong incentives to countries in the region to work together. at the same time, it does not replace existing international financial arrangements, but rather supplements them. furthermore, the stability of the asian region naturally has global implications. thus, the regional surveillance provided by the asean + 3 macroeconomic research office, amro, together with the global surveillance provided by the imf will both play a pivotal role in the effective operation of the chiang mai initiative. thank you. bis central bankers ’ speeches

interconnectedness, there will neither be a de - coupling between the emerging economies and the advanced economies nor a complete coupling of. while it is a common - sense answer, the conclusion lies somewhere in between. what would be important for the global economy is that both the advanced economies and the emerging economies grow together in a well - balanced and sustainable manner without relying too much on each other. ii. developments in japan's economic activity and prices economic activity based on those developments in the global economy, let me turn to japan's economy. japan's economy was affected by the effects of global acute pain since the autumn of 2008 and significantly deteriorated. one characteristic of japan is that the industries related to durable consumer goods and capital goods, such as automobiles, electronic machinery, and general machinery, have a significant share in the economy. not a few goods of those industries are exported to the advanced economies in the united states and europe directly or through assembly bases in asian countries. however, due to the rapid plunge in the global economy since the autumn of 2008 and heightened uncertainty for the future, households and firms around the world rushed to display defensive behavior of curtailing their spending on expensive durable goods consumption as well as machinery and equipment. in addition, the decline in the functioning of global credit markets contracted consumer credits and further reduced the appetite for purchasing mainly durable consumer goods. that is one of the major reasons japan's exports rapidly declined and production plunged. this suggests that the recovery in japan's exports should start once the effects of acute pain wane in the united states and europe. in addition, a faster - than - expected recovery in the emerging economies including china has contributed significantly to the increase in japan's exports. as a result, exports and production turned upward around this early spring and have been increasing. against such a backdrop, business sentiment especially at large manufacturing firms has also been improving. as such, although japan's economy experienced a sharp downturn, it has been improving at a faster pace than other advanced economies. however, we should bear firmly in mind that the level of economic activity is still low, with the gdp remaining at slightly above 90 percent, according to the latest available figure of the april - june quarter, and the level of september industrial production remaining at slightly above 80 percent of that immediately before the failure of lehman brothers, respectively. the bank of japan uses a somewhat cautious phrase that " japan's economy has started to pick up " in expressing the current state of