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Unformatted text preview: This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: NBER Macroeconomics Annual 1999, Volume 14 Volume Author/Editor: Ben S. Bernanke and Julio J. Rotemberg, editors Volume Publisher: MIT Volume ISBN: 0-262-52271-3 Volume URL: http://www.nber.org/books/bern00-1 Conference Date: March 26-27, 1999 Publication Date: January 2000 Chapter Title: The Japanese Banking Crisis: Where Did It Come From and How Will It End? Chapter Author: Takeo Hoshi, Anil Kashyap Chapter URL: http://www.nber.org/chapters/c11047 Chapter pages in book: (p. 129 - 212) Takeo Hoshi and Anil Kashyap GRADUATE SCHOOL OF INTERNATIONAL RELATIONS AND PACIFIC STUDIES, UNIVERSITY OF CALIFORNIA, SAN DIEGO; AND GRADUATE SCHOOL OF BUSINESS, UNIVERSITY OF CHICAGO, FEDERAL RESERVE BANK OF CHICAGO, AND NBER The Japanese Banking Crisis: Where D id it Com e from and How W ill it End? 1. Introduction Japan's financial system is in the midst of a major transformation. One driving force is deregulation. The reform program that has come to be known as the Japanese Big Bang represents the conclusion of a deregula- tion process that began more than 20 years ago. By the time the Big Bang is complete, in 2001, banks, security firms, and insurance companies will face a level playing field on which unfettered competition can occur. At that time, Japanese financial markets will be at least as liberalized as the U.S. markets. A second (and we will argue related) driving factor is the current huge We thank Ben Bernanke, Ricardo Caballero, Menzie Chin, Peter Cowhey, Mitsuhiro Fukao, Mark Gertler, Peter Gourevitch, Yasushi Hamao, Masahiro Higo, Michael Hutchison, Tomohiro Kinoshita, Hugh Patrick, Joe Peek, Julio Rotemberg, Ross Starr, Robert Uriu, and Yaacov Vertzberger along with the participants in the presentations at the University of Chicago Graduate School of Business Brown Bag Lunch, the NBER Japan Group, the Bank of Japan, the Bank of Italy, the UCLA conference on the "Political Economy of the Japanese Financial Crisis," the Federal Reserve Bank of San Francisco, and IR/PS at University of California, San Diego for helpful comments. We thank Raghu Rajan for providing data from the National Survey of Small Business Finance, Itsuko Takemura of the Institute of Fiscal and Monetary Policy at the Japanese Ministry of Finance for providing data from Hojin Kigyo Tokei, and Simon Gilchrist, Kenji Hayashi, and Sumio Saruyama for helping us with other data issues. We thank Fernando Avalos, Yumiko Ito, John McNulty, and Motoki Yanase for excellent research assistance. Kashyap's work was supported through a grant from the National Science Foundation to the National Bureau of Economic Research....
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