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Change and Crisis in the Japanese Banking Industry

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  • Krawczyk, Mariusz K.

Abstract

The weakness of the Japanese banking industry, suffering from acute problem of non-performing loans, prevents Japan from restoring sound growth rates despite having undertaken structural reforms and substantial fiscal policy efforts, and, through impairing transmission channels of monetary policy, it has also made ineffective efforts to stimulate the economy through ?zero interest rates? and quantitative easing policy. Misunderstanding the roots of the banking crisis contributed greatly to its exceptional length and depth and prevented its early solution. Poor coordination and sequencing of liberalisation of financial services together with macroeconomic policy mistakes have been responsible for the crisis. But the origins of those mistakes can be traced to the bureaucratic character of the country?s policy-making process often lacking a comprehensive analysis of macroeconomic effects of a particular policy decision. Simple solution to the banking crisis in the form of eliminating non-performing loans burden, bailing out ailing financial institutions etc., if not accompanied by decisive steps restoring rationality to the public spending and resolving the problems arising from the presence of the government sponsored financial institutions, may not be sufficient to achieve sound growth and prevent similar crises in the future.

Suggested Citation

  • Krawczyk, Mariusz K., 2004. "Change and Crisis in the Japanese Banking Industry," HWWA Discussion Papers 277, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26383
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    File URL: https://www.econstor.eu/bitstream/10419/19249/1/277.pdf
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    References listed on IDEAS

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    1. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    2. Toshitaka Sekine, 1999. "Firm Investment and Balance-Sheet Problems in Japan," IMF Working Papers 99/111, International Monetary Fund.
    3. Anonymous, 1999. "The Y2000 and the banking sector," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
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    Cited by:

    1. Gab-Je Jo, 2010. "The Transmission of Japanese Financial Shocks: Evidence from International Bank Claims on East Asian Economies," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(5), pages 4-17, September.

    More about this item

    Keywords

    Japanese economy; banking crisis; financial liberalisation;

    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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