The measurement of financial intermediation in Japan
In this paper, we compute financial intermediation ratios for Japan (1970-2003) on a book value basis. According to our results, the intermediation ratio has remained quite stable, at around 85%. However, this stability is the result of two opposing trends : a decrease in credits and an increase in financial securities owned by financial (mostly, non banking) institutions. These two opposing trends would not have appeared if we had used traditional indicators computed as a fraction on GDP, or that build on a narrow definition of intermediation or use market value data. Fundamentally, our results provide evidence for a very close relation between intermediate financings and market financings and tend to reject the hypothesis of the Japanese financial system's convergence toward a capital market-based system.
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