Europe and the Japanese Banking Challenge

The dramatic overseas expansion of Japanese banks during the 1980s provoked major policy debates within the European Community. Fears that Japanese firms in the banking industry might replicate earlier successes in other industries, together with charges that Japan did not grant reciprocal access to European banks, raised important questions for EC member states committed to the implementation of common banking policies. Adoption of the crucially important Second Banking Coordination Directive and other public measures enabled the Community flexibly to impose strong controls on Japanese banks in the region. The nature of these public measures toward Japanese firms in the Community's banking industry, together with related EC policies toward local Japanese competition in other industries, suggested the emergence of a more general EC policy model for confronting the vaunted ‘Japanese challenge.’