Before main banks : a selective historical overview of Japan's prewar financialsystem

The postwar experience of the Japanese banking system has received considerable attention recently partly because conditions in defeated Japan in 1945 (including high inflation and the need to switch from a military to a civilian economy) are similar to those in transition economies today. Policymakers in transition economies can learn a good deal from the experiences of Japan's postwar financial system but should remember that Japan also experienced extraordinary industrial growth and financial institution building in the late nineteenth and early twentieth centuries. Lessons to be learned from that experience include the following: Business conglomerates that did not continue to depend on government patronage were more successful than others in making the transition to a modern industrial economy. Banks that made a conscious effort to reduce their dependence on central bank credit were more successful than those that did not. The establishment of procedures for punishing defaulting borrowers helped the development of the payments system. Limits on the amount of lending to related parties appear to have contributed to financial stability (and could have contributed more if the newer"zaibatsu"had been as prudent as the older ones). Bank bailouts without accompanying reform (such as those the Bank of Japan undertook in 1920 and 1922) probably increased the likelihood of a more serious crisis, such as that of 1927. Capital standards - the minimum capital requirements established in the 1927 law - were a viable means of encouraging bank consolidation and more prudent lending. The public financial system served as a buffer when the banking sector was downsized.Banks&Banking Reform,Payment Systems&Infrastructure,Financial Intermediation,Financial Crisis Management&Restructuring,Decentralization,Financial Intermediation,Financial Crisis Management&Restructuring,Municipal Financial Management,Banking Law,Banks&Banking Reform

Sovereign credit ratings

Sovereign ratings are gaining importance as more governments with greater default risk borrow in international bond markets. But while the ratings have proved useful to governments seeking market access, the difficulty of assessing sovereign risk has led to agency disagreements and public controversy over specific rating assignments. Recognizing this difficulty, the financial markets have shown some skepticism toward sovereign ratings when pricing issues.Credit ; Debts, External ; Corporate bonds

Determinants and impact of sovereign credit ratings

The authors conduct the first systematic analysis of the determinants and impact of the sovereign credit ratings assigned by the two leading U.S. agencies, Moody's Investor Services and Standard and Poor's. Of the large number of criteria used by the two agencies, six factors appear to play an important role in determining a country's credit rating: per capita income, GDP growth, inflation, external debt, level of economic development, and default history. In addition, the authors find that sovereign ratings influence market yields--particularly those on non-investment-grade issues--independently of any correlation with publicly available information.Credit ; Debts, External

The disposal of bad loans in Japan: A review of recent policy initiatives

In this text, we will review the origins, structure, and operations of the Cooperative Credit Purchasing Company through fiscal year 1993. We will addend to this an overview of the proposed formation of special purpose companies (SPCs) to assist banks in the disposal of a different class of outstanding loans. In conclusion, we will assess how these measures fit into the Japanese approach to the reconstruction of bank balance sheets

The governance of failure: An anatomy of corporate bankruptcy in Japan

The broad trade-offs facing bankruptcy policy are, of course, not uniquely American. In this paper, we survey the Japanese corporate bankruptcy system, and present a comprehensive empirical analysis as to how it works in practice. Our framework for analysis is a variation on a theme of transaction cost economics: instruments of bankruptcy policy should effect a discriminating alignment between firms and the institutions governing failure, one which grants the services of legally centralized recontracting to those cases that warrant it, while maintaining incentive-intensity in private ordering for the others. (Williamson, 1985; 1989) This paper, through the examination of bankruptcy statistics, and the analysis of bankruptcy laws, courts and other institutions governing business failure in Japan, presents the Japanese system as a case study of corporate bankruptcy policy and institutional design

Panel Comment

2015年6月16日 於:早稲田大学国際会議場 井深大記念ホー

The role of long-term credit banks within the main bank system

One problem with the provision of long-term investment financing by commercial banks is that it can put at risk the uninterrupted provision of liquidity services to the population at large. Though economic models often abstract away from this problem with the assumption that banks providing liquidity services have the ability to diversify away the long-term risk of their outstanding loans, regulators have rarely been so sanguine. In general, the U.S. has depended on the existence of well-developed securities markets to supplement and in many cases replace the provision of long-term debt by commercial banks. In Japan - particularly the Japan of the high-growth era -the answer has lain rather in the creation of special classes of banks whose principal sources of financing are other than individual deposits. This paper examines one such class of institution -that of the long-term credit banks

Capital structure and the issuance of corporate bonds in emerging Asia

In emerging Asia's local-currency bond market, the government bond segments have largely come of age while the corporate bond markets have remained immature. This paper focuses on the question of what drives corporate bond issuance, an issue of great practical relevance for policymakers in the region. We analyse the financing decisions of some 4,600 firms in eight countries in emerging Asia. We analyse these decisions within the context of the firms'capital structure. We also analyse the effect of market depth, relying on market-wide indicators from the BIS. We find that for both seasoned and unseasoned issuers, size and leverage both matter for the decision to issue. The availability of tangible assets matters for the decision to issue in foreign currency. At the level of the markets, the depth of the market and interest differentials matter