this forum today. this type of forum is a practical step toward achieving the ultimate common goal of asia's bond market development. the global economy continues to recover and the financial system has been maintaining stability. as the imf's managing director expressed in her global policy agenda at the last international monetary and financial committee ( imfc ) meeting, current economic and financial conditions provide " a window of opportunity " to tackle key challenges. stakeholders in the region must maintain the will to further develop and deepen the market. through these concerted efforts, the challenges in fostering bond markets can be overcome. on the 10th anniversary of the asian financial crisis, at a boj symposium, the then governor zeti of bank negara malaysia, stated : asia, especially the asean tigers, is back and poised to leap on to the next wave of economic advancement and prosperity. 6 how correct she was. asia's economy has developed much more vigorously than many had anticipated. economic integration in the region has further deepened through the development of global value chains. looking ahead to the next twenty years, asia's economy will continue to be at the core of world economic growth and we will experience further integration. along with such developments, it is natural to seek more developed and integrated regional financial markets. we can anticipate that twenty years from now, asia's financial markets will have developed to become as efficient and liquid as other major financial centers in the world. thank you for your kind attention. " ten years after the asian currency crisis : future challenges for asian economies and financial markets, " a speech at the international symposium hosted by the center for monetary cooperation in asia ( cemcoa ) of the boj on january 22, 2007 in tokyo ( available from https : / / www. boj. or. jp / en / announcements / release _ 2007 / index. htm / ). asian financial markets － 20 years since the asian financial crisis, and prospects for the next 20 years － november 28, 2017 haruhiko kuroda governor of the bank of japan chart 1 increased resilience less reliance on foreign - currencydenominated short - term funding % growth of asian local currency bond markets us $ trillion indonesia malaysia philippines thailand corporate government cy notes : 1. the figures are the ratios of foreign currency - denominated short - term claims to all claims of foreign banks. 2. the latest data are as of end - june 2017. source : bis. cy notes : 1

. as i have mentioned, local currency bond markets have grown over the last twenty years. at the same time, bank financing still dominates as a primary source of funding in the region. you can see this from chart 2. bank credit, as a source of corporate funding, has outgrown both stock market capitalization and corporate bonds outstanding over the years. the strong reliance on bank - financing may be explained by asian corporate culture, which puts high priority on business relationships. bond financing is often not the first choice for domestic firms when financing their business. to make my point clear, i am not proposing that asian corporates should rely on market - financing over bank - financing, as is the case in some other countries. i would rather like to stress the importance of diversifying the sources of funding to reduce the direct effect on the corporate sector, should the banking sector face economic or financial shocks. along with this cultural issue, domestic firms are deterred by the cost of bond - financing when compared with bank loans. one of the factors that explain the unattractiveness of bond - financing may be the lower levels of market activity and less liquidity in the secondary market. with lower liquidity in the secondary market, investors require additional premiums, which increase the cost of issuance. in such an environment, domestic firms are more likely to rely on banks for financing. in this regard, developing highly efficient and liquid local currency bond markets is essential. past initiatives in the region have enriched the primary markets. we may therefore need to put more focus on developing liquid secondary markets. as presented in chart 3, according to a survey conducted by asian bonds online, there is no single factor that inhibits the development of the secondary markets. survey respondents were asked how important each of the eight structural issues was, with respect to local currency bond market liquidity. the survey results in recent three years show that " greater diversity of investor profile " was the most important structural issue for promoting the market liquidity. another structural issue, " transaction funding, " which also marked a relatively high score, may also be worth noting as an important impediment. let me elaborate these two structural issues. first, the issue of investor base diversification. since banks are the dominant financial institutions in the region, they are often the largest investor group as well. the presence of buy - and - trade investors like mutual funds, and active investors like hedge funds is relatively low, and this may be one of the