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Paying for the FILP

In: Structural Impediments to Growth in Japan

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  • Takero Doi
  • Takeo Hoshi

Abstract

This paper examines the financial health of the Fiscal Investment and Loan Program (FILP) as of the end of March 2001. We study the financial conditions of FILP recipients, which include public corporations and local governments. We find many are de facto insolvent. Our estimates suggest as much as 75% of the FILP loans are bad. The expected losses are estimated to be about ?75 trillion (over 15% of GDP). We also studied the effects of the FILP reform of April 2001, which tries to introduce market discipline in allocation of FILP funds. No significant changes in financial flow are detected, yet. The financial market seems to differentiate the newly introduced FILP agency bonds, which are supposed to without government guarantee, from government guaranteed bonds. It is too early to tell, however, whether the financial market will become an effective monitor of FILP agencies.

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This chapter was published in:

  • Magnus Blomström & Jennifer Corbett & Fumio Hayashi & Anil Kashyap, 2003. "Structural Impediments to Growth in Japan," NBER Books, National Bureau of Economic Research, Inc, number blom03-1, January.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9572.

    Handle: RePEc:nbr:nberch:9572

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    1. Bernstein, Jeffrey I & Nadiri, M Ishaq, 1989. "Research and Development and Intra-industry Spillovers: An Empirical Application of Dynamic Duality," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 56(2), pages 249-67, April.
    2. Iwamoto, Yasushi, 2002. "The Fiscal Investment and Loan Program in Transition," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 583-604, December.
    3. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, December.
    4. "Iwamoto, Yasushi", 2001. "Fiscal Investment and Loan Program―A Perspective on Government Interventions in the Japanese Financial Sector―," Economic Review, Hitotsubashi University, Hitotsubashi University, vol. 52(1), pages 2-15, January.
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    Cited by:
    1. Robert Dekle, 2004. "Financing Consumption in an Aging Japan: The Role of Foreign Capital Inflows in Immigration," NBER Working Papers 10781, National Bureau of Economic Research, Inc.
    2. Takeo Hoshi & Anil K. Kashyap, 2004. "Japan's Financial Crisis and Economic Stagnation," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 3-26, Winter.
    3. Takeo Hoshi & Takatoshi Ito, 2012. "Defying Gravity: How Long Will Japanese Government Bond Prices Remain High?," NBER Working Papers 18287, National Bureau of Economic Research, Inc.
    4. Christian Broda & David E. Weinstein, 2004. "Happy News from the Dismal Science: Reassessing the Japanese Fiscal Policy and Sustainability," NBER Working Papers 10988, National Bureau of Economic Research, Inc.
    5. Robert Dekle, 2003. "The Deteriorating Fiscal Situation and an Aging Population," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 71-88 National Bureau of Economic Research, Inc.
    6. Masami Imai, 2008. "Crowding-Out Effects of a Government-Owned Depository Institution: Evidence from a Natural Experiment in Japan," Wesleyan Economics Working Papers 2008-003, Wesleyan University, Department of Economics.
    7. Yongseok Shin & Benjamin Moll & Francisco J. Buera, 2011. "Well-Intended Policies," 2011 Meeting Papers 1244, Society for Economic Dynamics.
    8. Imai, Masami, 2012. "Local economic effects of a government-owned depository institution: Evidence from a natural experiment in Japan," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 21(1), pages 1-22.
    9. Sawada, Michiru, 2013. "Measuring the effect of postal saving privatization on the Japanese banking industry: Evidence from the 2005 general election," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 21(1), pages 967-983.
    10. Oshio, Takashi, 2004. "Social security and trust fund management," Journal of the Japanese and International Economies, Elsevier, vol. 18(4), pages 528-550, December.
    11. Uwe Vollmer & Diemo Dietrich & Ralf bebenroth, 2009. "Behold the 'Behemoth'. The privatization of Japan Post Bank," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University 236, Research Institute for Economics & Business Administration, Kobe University.

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