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What Happened to Japanese Banks?

Author

Listed:
  • Hoshi, Takeo

    (U CA, San Diego)

Abstract

This paper argues that the slow and incomplete deregulation of the financial system in the 1980s was the most important factor behind the Japanese banking troubles in the 1990s. The regression analysis of Japanese banks shows that the cross-sectional variation of bad loans ratios is best explained by the variation in the growth of loans to the real estate industry. The variation of growth of real estate lending, in turn, is explained by the varied experience of losing existing customers to capital markets. The rapid appreciation of land prices in the late 1980s also fueled the growth of real estate lending.

Suggested Citation

  • Hoshi, Takeo, 2001. "What Happened to Japanese Banks?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(1), pages 1-29, February.
  • Handle: RePEc:ime:imemes:v:19:y:2001:i:1:p:1-29
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me19-1-1.pdf
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    References listed on IDEAS

    as
    1. McCallum, Bennett T, 1995. "Two Fallacies Concerning Central-Bank Independence," American Economic Review, American Economic Association, vol. 85(2), pages 207-211, May.
    2. 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, vol. 19(S1), pages 395-450, February.
    3. Kuttner, Kenneth N. & Posen, Adam S., 1999. "Does talk matter after all? Inflation targeting and central bank behavior," CFS Working Paper Series 1999/04, Center for Financial Studies (CFS).
    4. Bennett T. McCallum, 2000. "Theoretical analysis regarding a zero lower bound on nominal interest rates," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 870-935.
    5. Tommaso Padoa-Schioppa, 1996. "Styles of Monetary Management," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 40-64, July.
    6. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    7. Shiller, Robert J. & Huston McCulloch, J., 1990. "The term structure of interest rates," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 13, pages 627-722 Elsevier.
    8. Marvin Goodfriend, 2000. "Overcoming the zero bound on interest rate policy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 1007-1057.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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

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