The Big Cleanse: The Japanese Response To The Financial Crisis Of 1990'S Seen From A Nordic Perspective
AbstractAs Japan and the Nordic countries entered the final decade of the 20th century, they experienced an abrupt end to a near decade-long rapid surge in asset prices. An era of economic optimism was transformed into recession and a difficult cleaning-up process of the financial sector started. Although different in volume, the banking crises of Japan and the Nordic countries show close similarities in character and timing. Also the institutional setting was similar, where extensive regulations was the order of the day. However, the Japanese response to the crisis was slow. Not until April 1998 did a liberalization package of the Japanese financial markets, called "Tokyo Big Bang", came into force. By that time, the Swedish and the Finnish financial crises were by and large solved and a new industrial structure had emerged, replacing the old one. Drawing from the Swedish and the Finnish experiences, a successful solution to the Japanese financial crisis necessitates radical measures by wiping away the whole stock of bad loans and raise efficiency on the financial markets and within financial firms. This might imply even more thorough restructuring than it was originally intended from the Japanese side. What factors made the restructuring of the Swedish and the Finnish financial markets faster than the Japanese one? Given the reforms so far, can Japan resolve its problems in the financial sector in reasonable time and eventually catch up with European and North American financial markets? The conclusions are that it is too late for Japan to simply emulate the Nordic model. Rather, reforms encompassing the whole Japanese economy are necessary in order to win back the confidence of the Japanese people. In this paper, the Japanese financial reforms will be compared to the Swedish and the Finnish experiences, focusing on the evolution of the banking crises and the government response to these crises. Furthermore, the subsequent changes in the industrial structure and regulatory institutions are also addressed. Finally, the usefulness of implementing a Nordic style banking sector restructuring in Japan is discussed.
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Bibliographic InfoPaper provided by The European Institute of Japanese Studies in its series EIJS Working Paper Series with number 149.
Length: 35 pages
Date of creation: 30 Jun 2002
Date of revision:
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Postal: The European Institute of Japanese Studies, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Web page: http://www.hhs.se/eijs/
More information through EDIRC
Bad Loans; Banking Crisis; Deregulation; Financial Reform; Finland; Japan; Sweden;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-10-23 (All new papers)
- NEP-IFN-2002-10-23 (International Finance)
- NEP-SEA-2002-09-28 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Risto Murto, 1994. "Finnish banking crisis : can we blame bank management?," Finnish Economic Papers, Finnish Economic Association, vol. 7(1), pages 56-68, Spring.
- Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, 02.
- Anderson, Christopher W. & CampbellII, Terry L., 2000. "Restructuring the Japanese banking system Has Japan gone far enough?," International Review of Financial Analysis, Elsevier, vol. 9(2), pages 197-218.
- Miroslav Kollár & Luboš Komárek, 2009. "Selective Approaches and Experiences with Problematic Assets in Banking Sector," Politická ekonomie, University of Economics, Prague, vol. 2009(5), pages 601-621.
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