29 October 2008

Sato - global financial crisis and Japan’s experience in the 1990s

Short-term measures and the re-design of the regulatory framework in the medium-term need to be implemented simultaneously to avoid moral hazard or distortions in the system in the long run, Sato said.

Regulators and policymakers facing the current financial crises can learn from the experience Japan made during the 1990’s, FSA Commissioner Takafumi Sato said in a speech held on 25 October reflecting on the similarities between the two crises. This includes that short-term measures and the re-design of the regulatory framework in the medium-term need to be implemented simultaneously and in a balanced manner to avoid moral hazard or distort the system in the long run.

 

“World’s financial regulators need to strike a good balance between short-term measures to cope with the ongoing crisis and medium-term policies to re-design the regulatory framework”, Sato said.

 

As for the changes in Japan’s regulatory framework “we need to manage the two medium-term processes of “re-regulation” and “deregulation” in a simultaneous manner”, the Commissioner underlined pointing to the initiatives of “Better Regulation” and “Better Market Initiative”.

 

The ‘Better Regulation’ initiative intends to improve the quality of financial regulation, while the ‘Better Market Initiative’ includes a policy package to strengthen the competitiveness of Japan’s financial markets.

 

It is my sense that implementing the FSF recommendations could eventually lead to a world of finance more firmly based on value-adding activities in the real economy, Sato said. “It is my hope that Japan will be able to emerge as one of the global financial centers in the post-subprime-crisis world of finance.”

 

Full speech

 

© FSA Japan