kiyohiko g nishimura : asian markets at the crossroads keynote address by mr kiyohiko g nishimura, deputy governor of the bank of japan, at the oecd - adbi 12th roundtable on “ capital market reform in asia ”, tokyo, 8 february 2012. * 0. * * introduction good morning, distinguished guests, ladies and gentlemen. i am delighted and honored to have the opportunity to deliver this keynote address at the oecd - adbi 12th roundtable in tokyo. this roundtable was established in 1999 immediately after the asian financial crisis. it aims at providing an opportunity for experts who have a wide range of backgrounds, including policymakers, and those working in financial industries and academia, to exchange frank and candid views on the development of asian financial markets. although it was unfortunately canceled last year owing to the great east japan earthquake, it is my distinct pleasure to be invited this year once again. in this regard, i would like to convey my sincere appreciation to the relevant institutions, including the oecd and the adbi, for their enthusiastic efforts to organize this valuable event. moreover, i hope our most welcome guests, taking the opportunity to attend international conferences hosted in japan, including this roundtable, can experience firsthand the great progress japan has made in recovering from the disaster. 1. financial markets in asia : resiliencies and vulnerabilities how should we evaluate the development of asian financial markets over the recent past? to answer this question, let me begin by summarizing the resiliencies and vulnerabilities of asian economies and financial markets at this moment. resiliencies as for the resiliencies, we can first point out the fact that asian economies have achieved higher growth in the past several years than other regions of the world. current accounts have in general recorded stable surpluses during this period ( chart 1 ). we should also commend the region ’ s authorities for their efforts in maintaining the relative soundness of their fiscal positions. given these favorable economic conditions, some asian jurisdictions, such as china, introduced prompt and large - scale fiscal stimulus measures, and contributed successfully to the recovery not only of the regional economy but also of the global economy as a whole. asian economies have also enhanced their resilience to various financial shocks through the flexible introduction and implementation of a number of macroprudential measures, including changes in the loan - to - value ( ltv ) ratio and the debt - to

positive trends. however, currently almost every central banker in this globalised world keeps wondering whether the night ahead will continue the dream run and if so, when will it run out of steam. the concerns of central bankers today arise out of what has been described as stable disequilibrium with every day adding to potential disequilibrium while continuing to be stable. the perceived risks arise mainly out of global imbalances and outlook for oil prices, particularly in the light of emerging geo - political situation. most market participants seem to sense these risks but this sentiment does not appear to be reflected in the pricing of risks. risks do not disappear but they get transferred to another part of the system. the macro policies in emerging markets in particular have to factor in these risks while continuously balancing financial sector reform and stability considerations. more important, for the regulators, monitoring where the risk lies has become very difficult due to emergence of large conglomerates, sophisticated market instruments such as derivatives and presence of players like hedge funds. the good news is that there is international cooperation among central bankers to mitigate the impact of such risks. the actuaries can certainly help the process of analysing the risks in insurance sectors that do affect a large segment of population that in fact seeks to minimize such risks through insurance. let me conclude by thanking the organisers for provoking me to think aloud and share my thoughts on a subject of common interest to all of us assembled here. i wish the conference fruitful deliberations, well balanced by pleasant stay and memories.