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A Reassessment of Japan fs Big Bang Financial Regulatory Reform


  • Bruce E. Aronson

    (Visiting Professor of Law, University of Washington School of Law; Professor of Law, Creighton University School of Law (E-mail:


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

Suggested Citation

  • Bruce E. Aronson, 2011. "A Reassessment of Japan fs 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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    References listed on IDEAS

    1. 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.
    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. Jose A. Lopez & Mark M. Spiegel, 2014. "Foreign Entry into Underwriting Services: Evidence from Japan's “Big Bang” Deregulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 445-468, March.
    4. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
    5. 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.
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    1. repec:eee:revfin:v:33:y:2017:i:c:p:12-28 is not listed on IDEAS

    More about this item


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

    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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