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Japan's Financial System: Its Perspective and the Authorities' Roles in Redesigning and Administering System


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  • Baba, Naohiko

    (Bank of Japan)

  • Hisada, Takamasa

    (Bank of Japan)

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    This paper discusses Japan's financial system, in particular its perspective and the authorities' roles in redesigning and administering the system. Japan's financial system, characterized by the "main bank system," depends heavily on banks and differs greatly from the U.S. financial system, which depends heavily on capital markets. We focus on changes in the financial environment such as IT innovation, globalization, and financial deregulation. We argue that these changes influence the functions and roles of banks and capital markets in favor of the latter. Many economists now regard the U.S. system as a model to be emulated. We claim, however, that Japan's system is not likely to shift rapidly toward the U.S. system in the near future, given Japan's unique financial structure including the large share of public finance. The Japanese authorities are expected to seek an optimal balance between capital markets and banks with a view to ensuring the efficient and stable functioning of the nation's overall financial system.

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    Bibliographic Info

    Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

    Volume (Year): 20 (2002)
    Issue (Month): 2 (April)
    Pages: 43-93

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    Handle: RePEc:ime:imemes:v:20:y:2002:i:2:p:43-93

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    Cited by:
    1. Agarwal, Sumit & Chomsisengphet, Souphala & Liu, Chunlin & Ghon Rhee, S., 2007. "Earnings management behaviors under different economic environments: Evidence from Japanese banks," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 429-443.


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