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Evolution of the Main Bank System in Japan

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  • Takeo Hoshi

Abstract

This paper examines the development of the main bank system in Japan. The pre-war system of corporate financing in Japan was very different from the main bank system in the post-war period. By the end of World War II, the transformation of corporate finance, which is characterized by a concentration of banking industry, a higher dependence on bank borrowings, the development and affirmation of close bank-firm ties, and the decline of shareholders' power, led to the creation of the prototype of the main bank system. The lack of commitment by the Japanese government and the Allied Forces to break up the close bank-firm ties ensured that many aspects of wartime corporate finance were carried over to the post-war period. During the late 1940s and the early 1950s, the banks, through their experience in the restructuring of industrial firms and in the period of severe credit crunch, gained substantial power to monitor firms, and the main bank system started to develop.

Suggested Citation

  • Takeo Hoshi, 1994. "Evolution of the Main Bank System in Japan," CEPR Financial Markets Paper 0046, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 33 Great Sutton Street, London EC1V 0DX..
    • Handle: RePEc:cpr:ceprfm:0046
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    Citations

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    Cited by:

    1. Yishay Yafeh & Oved Yosha, 2003. "Large Shareholders and Banks: Who Monitors and How?," Economic Journal, Royal Economic Society, vol. 113(484), pages 128-146, January.
    2. Luke Gower, 2000. "Some Structural Causes of Japan’s Banking Problems," RBA Research Discussion Papers rdp2000-03, Reserve Bank of Australia.
    3. Packer, Frank, 1995. "Before main banks : a selective historical overview of Japan's prewar financialsystem," Policy Research Working Paper Series 1537, The World Bank.
    4. Tobias Miarka & Michael Troge, 2005. "Do bank-firm relationships reduce bank debt? Evidence from Japan," The European Journal of Finance, Taylor & Francis Journals, vol. 11(1), pages 75-92.
    5. Yishay Yafeh, 2002. "An International Perspective of Japan's Corporate Groups and their Prospects," NBER Working Papers 9386, National Bureau of Economic Research, Inc.
    6. Yishay Yafeh, 2003. "An International Perspective of Corporate Groups and Their Prospects," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 259-284, National Bureau of Economic Research, Inc.
    7. Miarka, Tobias, 1999. "The recent economic role of bank-firm relationships in Japan," Discussion Papers, Research Unit: Market Dynamics FS IV 99-36, WZB Berlin Social Science Center.

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