BOJ Nishimura: Hard To Stop Financial, Econ Vicious Cycle

TOKYO -(Dow Jones)- Bank of Japan Deputy Gov. Kiyohiko Nishimura voiced concerns last Friday that it could be difficult to stop the current vicious cycle between financial distress and economic activity.
"Once an adverse feedback loop has been started, it is extremely difficult and costly to stop it and to restore confidence" in the markets, Nishimura said at a conference held by the Federal Reserve Bank of Chicago on Friday, according to the text of the speech released by the central bank on Monday.
While there is some resemblance between the financial crisis in the U.S. and the one Japan experienced in the 1990s, the current crisis is "far more complex, interconnected and global" than Japan's so-called "lost decade," Nishimura said.
The deputy chief also pointed out the difficulty in getting "reasonable estimates of losses and a reasonable pricing of troubled assets" during a financial turmoil - which leads to erosion in investor confidence and "excessive aversion to uncertainty."
To prevent further deepening of the crisis, Nishimura said it is necessary to "make every effort to avoid macro-systemic financial distress, and thus to regulate macro-systemically important financial institutions more closely and comprehensively."