Daiwa Securities Group Annual Report 2012 Management’s Discussion and Analysis <Overseas Markets> Macroeconomic Conditions in FY2011 53 agreed to increase support to Greece. By this time, however, con- ditions had deteriorated to the point where it looked like the author- ities were just taking stopgap measures to forestall a full-blown  crisis, rather than really addressing the issues that underlie fiscal  debt problems in EU countries, and which are a drain on economic  growth in Europe. Credit ratings agencies lowered their ratings on  government bonds in one European country after another, and  markets began to question whether the Greek government could  implement its reform plans. Government paralysis in countries  throughout the EU lent weight to the perception that the European  debt crisis had yet to be addressed seriously. The European Central Bank (ECB) responded to decelerating  economic growth by loosening its interest rate policy in November  2011, and again in December, but the outlook remains gloomy. On  the other hand, the ECB made massive amounts of liquidity avail- able to major European financial institutions in December 2011 and  February 2012 in order to dispel concerns that the fiscal crisis was  restricting the supply of funds to the financial sector. In March,  negotiations on ways to reduce the Greek national debt progressed  with no major trouble, and concerns about a possible default  began to recede. In the United States, weak employment figures and a depressed  real estate market kept the economy weak until August 2011, but  strong consumer spending from September onward suggested  that the US economy had hit bottom sooner than other major  industrialized countries. On the other hand, concerns about the US  fiscal deficit began to increase from around July. In August the  Congress passed legislation that raised the federal government’s  debt ceiling, which preserved the calm for the time being, but US  credit agencies responded by lowering their ratings on US long- term treasury bonds, which had formerly held the highest possible  rating. This revived concerns about a possible debt crisis and gen- erated turmoil in financial markets. The US Federal Reserve Board  During the first half of 2011, countries on the periphery of the  eurozone slid into a debt crisis and one by one, were forced to  seek help from the EU. In May, the EU and the International Mon- etary Fund (IMF) stepped in to lend financial support to Portugal,  and in June a meeting of European heads of state agreed to  increase the capital available in the European Financial Stability  Facility from  € 440 billion to  € 780 billion. In July, an EC summit  Since mid-2009, the global economy had been experiencing rela- tively firm growth. However, this trend was interrupted during the  July–September quarter of FY2011 when deepening concerns  about government debt in Europe and the US sent financial markets  into turmoil and put the brakes on economic growth in leading  industrialized countries. The emerging economies that had provided  much of the impetus for growth in recent years faced problems of  their own. As governments tightened interest rates and export  demand from industrialized countries dropped off, signs of a correc- tion began to appear. In response to signs of a slowdown in global  economic growth, markets began to anticipate lower demand for  raw materials, while investors fled from the commodities market in  search of lower risk investments, causing prices to tumble. By the  October–December quarter, increasing concerns about the debt  situation in Europe had seriously unsettled the markets. This was  compounded by the impact of severe flooding in Thailand in Octo- ber, which disrupted supply chains and had a major impact on  global manufacturing, especially in the auto and electronics sector.  Commodities markets experienced another wave of volatility as  turmoil in the Middle East sent prices soaring. Conditions slowly  improved in the January-March quarter as fears of a debt crisis in  Europe receded and signs of an economic recovery in the US  started to emerge. This eased some of the uncertainty and brought  a more optimistic outlook for the global economy. Nikkei Average and Trading Value GDP in Japan Source: Tokyo Stock Exchange, Daiwa Institute of Research Source: Cabinet Office, Government of Japan Note: The above data comprises seasonally adjusted annual rates. Growth rates may  not correspond to rates calculated based on total production. 123456789101112 123456789101112 123 0 2,000 4,000 6,000 8,000 10,000 12,000 0 1 2 3 4 5 6 2009 2010 2011 2012  Nikkei average at month-end (left)   TSE average daily trading value (right) (Yen) (¥ trillion) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q -5 -4 -3 -2 -1 0 1 2 3 FY2008 FY2009 FY2010 FY2011  Real GDP   Nominal GDP (%)