Ebook The Japanese Banking Crisis

This report is about the second tragic mistake which brought Japan from a leading economic power into an economy which struggled with persistent deflation and stagnation. It tries to explore where things went wrong, what were the alternatives, how and why the choices were made, and what would be needed to do better in the future.
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Ebook The Japanese Banking Crisis The Japanese Banking Crisis Himino Ryozo The Japanese Banking Crisis “Himino Ryozo has provided analysis of the 97-98 Japanese banking crisis that is clear, concise and compelling. Himino-san examines the causes, consequences and – most importantly – the lessons learnt from a traumatic period in Japanese financial history. He does so with the benefit of a career spent at the forefront of financial policy-making, both in Japan and internationally. It is often said ‘History doesn’t repeat itself, but it often rhymes.’ Many attributes of the Japanese banking crisis have, at their heart, difficult choices, missed opportunities and occasional failings that are in no way unique to Japan. Himino-san’s examination of the Japanese crisis should therefore be valued reading not just for Japanese policymakers, but financial policymakers the world over. Financial crises are all-too-frequent, and extremely costly. This analysis provides useful insights as to how we might do better to reduce and combat the crises of the future.” —Wayne Byres, Chair, Australian Prudential Regulation Authority Himino Ryozo The Japanese Banking Crisis Himino Ryozo Financial Services Agency Tokyo, Japan ISBN 978-981-15-9597-4 ISBN 978-981-15-9598-1 (eBook) https://doi.org/10.1007/978-981-15-9598-1 © The Editor(s) (if applicable) and The Author(s) 2021. This book is an open access publication. Open Access This book is licensed under the terms of the Creative Commons Attribution- NonCommercial-NoDerivatives 4.0 International License (http://creativecommons.org/ licenses/by-nc-nd/4.0/), which permits any noncommercial use, sharing, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if you modified the licensed material. You do not have permission under this license to share adapted material derived from this book or parts of it. The images or other third party material in this book are included in the book’s Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the book’s Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. This work is subject to copyright. All commercial rights are reserved by the author(s), whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Regarding these commercial rights a non-exclusive license has been granted to the publisher. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and informa- tion in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: © Melisa Hasan This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Contents 1 Introduction 1 Financial Cycle and Business Cycle 2 Learning from Mistakes 5 Five Phases in the Japanese Financial Cycle of 1986–2004 6 References 7 2 Bubbles 9 Export-Led Growth Strategy Reaching an Impasse 10 Expanding Domestic Demand 11 Financial Deregulation 14 Bankers’ Existential Threat 16 Bubbles 19 What Japan Gained and Lost 22 References 25 3 Pricking Bubbles 27 Monetary Policy 28 Prudential Policy 29 Tax, Land, and Fiscal Policies 33 Clean or Lean? 34 Too Little, Too Late? 36 In Hindsight 42 References 44 v vi CONTENTS 4 In-Between Years 47 Estimating the Size of the Problem 48 Catch 22 50 The Finance Ministry’s Choice 52 The Bank of Japan and the Prime Minister 54 Orderly Resolution Without Bailout 56 References ...