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The Legislative Dynamic: Evidence from the Deregulation of Financial Services in Japan

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  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School)

Abstract

In many ways, the current financial distress in Japan traces itself to the limited range of non-bank financial intermediaries available. That limited availability is itself a creature of regulation. By examining the recent deregulation of commercial paper issues by financial intermediaries, we explore the dynamics of the regulatory process that originally contributed to -- if not caused -- the current distress. We also use this case study to explore the dynamics of the Japanese legislative and regulatory process more generally. We characterize deregulation as a bargain between banks and the newer non-bank intermediaries: the banks acquiesced to commercial paper issues by non-banks, while the non-banks agreed to the regulatory jurisdiction of the Ministry of Finance. The non-banks obtained a cost-effective way to raise additional funds; the banks brought their new competitors within their regulatorily enforced cartel. At a specific level, the dynamics illustrate the classic Stiglerian theory of regulation; at a more general level, they illustrate the trans-national economic logic to the Japanese legislative and regulatory process.

Suggested Citation

  • Yoshiro Miwa & J. Mark Ramseyer, 2002. "The Legislative Dynamic: Evidence from the Deregulation of Financial Services in Japan," CIRJE F-Series CIRJE-F-158, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2002cf158
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