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A Reassessment of Japan's Big Bang Financial Regulatory Reform

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  • Bruce E. Aronson

    (Visiting Professor of Law, University of Washington School of Law; Professor of Law, Creighton University School of Law (E-mail: aronson@creighton.edu))

Abstract

This paper reassesses the results of Japan's financial deregulation over the last two decades. Japan's Big Bang sought to transform a highly regulated bank-centered financial system to a transparent, market-centered financial system to revitalize Japan's economy and aging society. Prior assessments generally view this reform effort as a failure due to Japan's low economic growth rate. This paper finds, contrary to conventional wisdom, that government-led deregulatory and administrative reform was largely successful in removing legal and administrative obstacles to the development of a market-centered financial system. However, the persistence of past practices by market participants and strong headwinds such as low macroeconomic growth and poor financial market performance prevented achievement of the Big Bang' s ambitious goals. This illustrates both the limits of what can be accomplished through deregulation of financial markets and the problem inherent in using a results-oriented standard in evaluating Japan's reform efforts.

Suggested Citation

  • Bruce E. Aronson, 2011. "A Reassessment of Japan's Big Bang Financial Regulatory Reform," IMES Discussion Paper Series 11-E-19, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:11-e-19
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    File URL: http://www.imes.boj.or.jp/research/papers/english/11-E-19.pdf
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    References listed on IDEAS

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    Cited by:

    1. Hirofumi Fukuyama & William L. Weber, 2015. "Network Performance of Japanese Credit Cooperatives, 2004–2007," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 825-846.
    2. Iwatsubo, Kentaro & Watkins, Clinton, 2021. "The changing role of foreign investors in Tokyo stock price formation," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    3. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran & Hall, John H. & Gupta, Atul, 2017. "Is there a link between economic growth and insurance and banking sector activities in the G-20 countries?," Review of Financial Economics, Elsevier, vol. 33(C), pages 12-28.
    4. W. R. Garside, 2012. "Japan’s Great Stagnation," Books, Edward Elgar Publishing, number 14624.

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    More about this item

    Keywords

    Big Bang; Financial Deregulation; Financial Reform; Corporate Bond Market; Venture Capital; Financial Center;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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