The Japanese Banking Crisis

Description

This open access book provides a readable narrative of the developments and analyzes why the Japanese authorities could not avoid making choices that led to this outcome. Since the mid-1980s, Japan, which was a leading competitor in the world's manufacturing sector, tried to transform itself into an economy with domestic demand-led mature growth. The ensuing bubbles, busts, and banking crisis, however, left the country chronicle deflation and stagnation. The chapters are based on the lectures to regulators from emerging economies delivered at the Global Financial Partnership Center of the Financial Services Agency of Japan. Contents About the Author List of Figures List of Tables 1 Introduction Financial Cycle and Business Cycle Learning from Mistakes Five Phases in the Japanese Financial Cycle of 1986–2004 References 2 Bubbles Export-Led Growth Strategy Reaching an Impasse Expanding Domestic Demand Financial Deregulation Bankers’ Existential Threat Bubbles What Japan Gained and Lost References 3 Pricking Bubbles Monetary Policy Prudential Policy Tax, Land, and Fiscal Policies Clean or Lean? Too Little, Too Late? In Hindsight References 4 In-Between Years Estimating the Size of the Problem Catch 22 The Finance Ministry’s Choice The Bank of Japan and the Prime Minister Orderly Resolution Without Bailout11 References 5 Crisis Political Leadership Capital Injections and Raids on Regulators Summer 1998 Evolution of Resolution Approaches Disclosure, Provisioning, and Corrective Actions New Supervisory Culture Credit Crunch, Recession, Bankruptcy, Unemployment, and Suicide Moral Hazard and Firefighting References 6 Restructuring Banks and Borrowers Resolving Bad Loans Resolving Banks Restructuring Borrowers Labor Market Adjustments How Much Did It Cost? What if the Immediate Clean-Up Option Had Been Chosen in 1992? References 7 What Japan Gained and Lost References Index