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A Financial System Perspective on Japan's Experience in the Late 1980s

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Author Info

  • Masazumi Hattori

    (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: masazumi.hattori@boj.or.jp))

  • Hyun Song Shin

    (Professor, Princeton University (E-mail: hsshin@ princeton.edu))

  • Wataru Takahashi

    (Director-General, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: wataru.takahashi@boj.or.jp))

Abstract

This paper revisits the events of the 1980s bubble in Japan in light of the lessons learned from the subprime crisis in the United States. Our focus is on the role played by sectoral developments in the financial system in Japan. We highlight the transformation of a subset of non-financial firms (the large manufacturing firms) from being net debtors to the banks to becoming net creditors to the banks, thereby becoming part of the financial intermediary sector. In this way, large manufacturing firms in Japan played the role of surrogate wholesale banks that increased the overall supply of credit to the economy. When good borrowers already had credit and yet loose monetary conditions encouraged greater credit supply, credit availability to marginal borrowers and to real estate-related sectors increased. We discuss the role of market conditions and monetary policy in this development.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-19.

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Date of creation: Aug 2009
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Handle: RePEc:ime:imedps:09-e-19

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Keywords: Balance sheet; Commitment; Credit supply; Financial liberalization; Financial system perspective; Japan; Subprime crisis;

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  1. Tobias Adrian & Hyun Song Shin, 2008. "Financial intermediaries, financial stability, and monetary policy," Staff Reports 346, Federal Reserve Bank of New York.
  2. William R. White & Claudio E. V. Borio, 2004. "Whither monetary and financial stability? the implications of evolving policy regimes," BIS Working Papers 147, Bank for International Settlements.
  3. Okina, Kunio & Shirakawa, Masaaki & Shiratsuka, Shigenori, 2001. "The Asset Price Bubble and Monetary Policy: Japan's Experience in the Late 1980s and the Lessons: Background Paper," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 395-450, February.
  4. Takeo Hoshi & David S. Scharfstein & Kenneth J. Singleton, 1993. "Japanese Corporate Investment and Bank of Japan Guidance of Commercial Bank Lending," NBER Chapters, in: Japanese Monetary Policy, pages 63-94 National Bureau of Economic Research, Inc.
  5. Guillermo Ortiz & Chair, 2003. "Whither monetary and financial stability : the implications of evolving policy regimes," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 225-240.
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Citations

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Cited by:
  1. Shigenori Shiratsuka & Wataru Takahashi & Kozo Ueda, 2009. "Financial System and Monetary Policy Implementation: Summary of the 2009 International Conference Organized by the Institute for Monetary and Economic Studies of the Bank of Japan," IMES Discussion Paper Series 09-E-20, Institute for Monetary and Economic Studies, Bank of Japan.
  2. Shigenori Shiratsuka, & Wataru Takahashi & Kozo Ueda, 2009. "2009 International Conference "Financial System and Monetary Policy Implementation" Summary," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 27(1), pages 1-18, November.
  3. Masaaki Shirakawa, 2009. "2009 International Conference "Financial System and Monetary Policy Implementation," Opening Speech Financial System and Monetary Policy Implementation: Long and Winding Evolution in the Way," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 27(1), pages 19-24, November.
  4. Hyun Song Shin, 2012. "Adapting Macropudential Policies to Global Liquidity Conditions," Working Papers Central Bank of Chile 671, Central Bank of Chile.
  5. Hyun Jeong Kim & Hyun Song Shin & Jacho Yun, 2013. "Monetary Aggregates and the Central Bank’s Financial Stability Mandate," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 69-108, January.
  6. Wataru Takahashi, 2011. "The Japanese Financial Sector's Transition from High Growth to the 'Lost Decades': A Market Economy Perspective," Discussion Paper Series DP2011-29, Research Institute for Economics & Business Administration, Kobe University.
  7. Shigenori Shiratsuka, 2011. "A Macroprudential Perspective in Central Banking," IMES Discussion Paper Series 11-E-03, Institute for Monetary and Economic Studies, Bank of Japan.

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