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Unformatted text preview: ly three aspects of the Japanese system which are picked out as different from
Western counterparts: labour-market structures and
industrial-relations systems; the financial structure
and its connection to corporate governance; and the
system of industrial organization based around horizontal conglomerates or keiretsu.
The main advantages of the bank-centred financial
structure were argued to be the provision of (in
effect) long-term lending which gave rise to ‘patient
capital’. The benefits were seen to be a risk-sharing
relationship (as described by Yishay Yafeh in this
issue) which, among other things, facilitated higher
investment spending generally and higher R&D
spending in particular.10 The system is also assumed
to have improved information flows and monitoring
(Aoki and Patrick, 1994), although this is difficult to
establish empirically. These views are not uncontroversial, as is clear from the paper by Hanazaki and
Horiuchi, and some would claim that the system
merely led to interconnected lending of poor quality
and encouraged moral hazard.
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- Summer '13