Repeat of Great Depression Unlikely: BOJ Shirakawa

Tokyo, Nov. 5 (Jiji Press)--Bank of Japan Governor Masaaki
Shirakawa said Wednesday that the ongoing global financial crisis is
unlikely to develop into a second Great Depression because countries' policy
responses are different from those in the past.

Shirakawa said in a lecture here that the current crisis is one
unprecedented in magnitude since the Great Depression, but there are clear
differences from the slump of the 1930s.
He pointed out that a global economic downturn occurred in that
decade because the U.S. Federal Reserve did not serve as the lender of last
resort and allowed financial institutions to go bankrupt. At the same time,
the world was under a pegged exchange rate regime and there were growing
protectionist moves.
"I don't think the world will go back to the past situation,"
Shirakawa said, noting that bank deposit protection systems are now
established.
Shirakawa pointed out that the upheaval of the U.S. subprime loan
market is essentially the bursting of a bubble. It is difficult to recognize
when a bubble is forming, he said, stressing that efforts must be made to
reduce the impact of one collapsing.
But Shirakawa also expressed concern that the financial crisis is
gradually spilling over into the Japanese and emerging economies.
He reiterated his view that the Japanese economy is likely to
remain stagnant in the foreseeable future but will return to a sustainable
growth path over the long term. The BOJ governor, however, cautioned that
uncertainty about the economy is very strong.