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Window Guidance By The Bank Of Japan: Was Lending Controlled?

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  • JAMES R. RHODES
  • NAOYUKI YOSHINO

Abstract

"Over the period 1961-1991, the Bank of Japan (BOJ) attempted to directly control the volume of commercial bank credit by providing lending targets for selected banks. This policy of "window guidance" (WG) applied to only a subset of lending institutions. The guided banks involved were under no legal obligation to heed the BOJ's requests. Using actual WG data to city banks, two questions are addressed. First, did city banks comply with WG (the "compliance hypothesis")? Second, was WG successful in controlling economywide lending or did lending adjustments by other financial institutions simply displace the lending of guided banks (the "displacement hypothesis")? The empirical results show a high degree of compliance in the first two decades of the program and evidence of weakening in the final years. The displacement hypothesis is rejected, particularly in the early period of highly regulated financial markets." ("JEL" E58, E51, E52) Copyright 1999 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 17 (1999)
Issue (Month): 2 (04)
Pages: 166-176

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Handle: RePEc:bla:coecpo:v:17:y:1999:i:2:p:166-176

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Cited by:
  1. Naoyuki Yoshino & James R. Rhodes, 2004. "Japan's Monetary Policy Transition, 1955-2004," Econometric Society 2004 Far Eastern Meetings 725, Econometric Society.
  2. Akihiko Kawaura, 2004. "Deregulation and governance: plight of Japanese banks in the 1990s," Applied Economics, Taylor & Francis Journals, vol. 36(5), pages 479-484.
  3. James R. Rhodes & Naoyuki Yoshino, 2007. "Japan’s Monetary Policy Transition, 1955-2005," GRIPS Discussion Papers 07-04, National Graduate Institute for Policy Studies.

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