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A Reassessment of Japanfs 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))

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    Abstract

    This paper reassesses the results of Japanfs financial deregulation over the last two decades. Japanfs Big Bang sought to transform a highly regulated bank-centered financial system to a transparent, market-centered financial system to revitalize Japanfs economy and aging society. Prior assessments generally view this reform effort as a failure due to Japanfs 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 Bangf 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 Japanfs reform efforts.

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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 11-E-19.

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    Date of creation: Aug 2011
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    Handle: RePEc:ime:imedps:11-e-19

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    Related research

    Keywords: Big Bang; Financial Deregulation; Financial Reform; Corporate Bond Market; Venture Capital; Financial Center;

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    1. Jonathan Batten & Peter Szilagyi, 2003. "Why Japan Needs to Develop its Corporate Bond Market," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(1), pages 83-108.
    2. Hibiki Ichiue, 2006. "Development of Japan’s credit markets," BIS Papers chapters, in: Bank for International Settlements (ed.), Developing corporate bond markets in Asia, volume 26, pages 88-95 Bank for International Settlements.
    3. Mark M. Spiegel & Jose A. Lopez, 2009. "Foreign entry into underwriting services: evidence from Japan's "Big Bang" deregulation," Working Paper Series 2009-14, Federal Reserve Bank of San Francisco.
    4. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
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