As for the foreign exchange market, the G7 central banks have undertaken a joint intervention aimed at helping Japan halt the revaluation of the yen. As a result, the market has cooled, and investors can now return to making "carry trades", in which the buying of riskier, higher-yielding assets (such as equities, commodities and property) is funded by selling low-yielding yen. The weakening yen can help Japan recover faster.

In reality, Japan's gross public debt is about twice its GDP, and more government spending will be needed to shore up reconstruction. This causes much concern that a tremendous debt bubble could burst. Nevertheless, considering the quite high percentage of savings in Japan, along with the fact that banks and insurers hold 95 percent of the debt domestically, the risks should be manageable.

The Japanese insurance industry faces material losses even though no detailed figures have been disclosed. Non-life insurers' losses are estimated to be larger than that of life insurers. But there is little possibility that such insurers could go bankrupt, because they have dispersed risks globally through re-insuring business and the Japanese government must protect them.

The tragedy has cast a shadow over Japan's new growth strategy for the next 20 years, approved last June and due to be implemented from this month. The resilience of the Japanese economy, however, will enable the country to cope with what has happened.

From the Chinese perspective this will no doubt create new opportunities for the two countries to expand cooperation in a win-win situation.

There is no need to panic over a financial meltdown in Japan. The Japanese financial system will surely continue to play its vital role in the country's growth.

The author is chairman of the Board of Directors, Bank of China.

(China Daily 04/06/2011 page8)