Even though former Prime Minister Hashimoto near the time of the Big Bang announcement and current Prime Minister Koizumi in his policy platform announced in October Economist b have sought to privatize the postal savings bank, they faced fierce opposition from fellow Liberal Democratic Party LDP members and government bureaucrats who wanted to continue to use the bank for funding public works projects and for propping up struggling companies, many which represent special interests supporting the LDP. Investment in individual stocks and mutual funds called "investment trusts" in Japan only make up 8.
Japanese officials expected that the ratio of individual financial assets invested in stocks and mutual funds would increase sharply as a result of the Big Bang financial reforms, such as the liberalization of stock commission fees Nakagawa and Shimizu , iii and a greater variety of investments offered by financial institutions. However, the percentage of stocks and mutual funds has dropped from 9. The ratio of risky assets, such as stocks and mutual funds, has not increased since for several reasons.
Since the Nikkei stock price index declined from nearly 40, in to 7, in April , Japanese households remain hesitant to jump into the equity market. Only about one-fifth of Japanese households attach great importance to "profitability," whereas about four-fifths put great importance on "safety" and "liquidity" of assets Nakagawa and Shimizu , 8. In addition, potential Japanese investors may not yet fully understand the risks and rewards of various financial products, and investments in small amounts incur relatively higher commission fees.
This section examines some of the short-term and long-term implications of the Japanese government's failure to deal decisively with non-performing bank loans and to implement more than the "letter" of Big Bang reform measures. Banks continue to be saddled with massive amounts of bad loans, much of which has not been recognized or reported. Moody's estimates that non-performing loans, including those not recognized by the authorities, exceed the banks' capital Katz , The failure to recognize these bad loans and institute collection procedures allows inefficient companies termed "zombies" by many writers to remain in business long after they should have restructured or gone out of business.
The money used to prop up these "zombie" companies and keep them from dying could be redirected to promising growth areas to create new companies and more productive jobs. This government policy to support weak banks and the "zombie" companies with loans from these banks has been "inadequate job creation for young entrants into the labor force" and "too slow exit of inefficient, uncompetitive firms" Patrick , 7.
Although the Japanese government's support of noncompetitive industries and companies promotes economic inefficiency, this policy does provide employment opportunities in the short-term. Japan has a less generous unemployment program than both Europe and the U. The government also provides very limited worker retraining programs to smooth the transition between jobs, and Japan does not have an active labor market for mid-career workers.
Any solution to the problem of the banks' non-performing loans must consider the effects on employees of the banks and the "zombie" companies with these loans. The bureaucracy continues to fight reform proposals. Takenaka, former chief economics adviser in the Koizumi cabinet, recommended several changes to accelerate the pace of bank reform. However, by the time he announced his official plan at the end of his first month in office, he had been forced by the Ministry of Finance, conservative elements in the LDP, and the banking bureaucracy to water down many of his more aggressive proposals.
Some of the ideas shot down by the bureaucracy and politicians included prosecution of bankers who misrepresented their accounts, prohibition of banks to artificially boost their capital bases through deferred tax assets and other schemes, and injection of public funds into the banks Tett , The Japanese government continues to intervene in many other ways to minimize the impact of the Big Bang reforms to create "free, fair, and global" financial markets.
In May , the government effectively nationalized Resona Bank when the bank fell below the minimum four percent capital requirement, but bank shareholders suffered no loss since the government injection of funds was so generous Patrick , The government continues to manipulate the stock market in order that stocks will be valued as high as possible at the end of the fiscal year on March 31 in order to help their valuation for banks, insurance companies, and other companies.
Although some foreign companies have purchased Japanese financial institutions since the Big Bang, Japanese political leaders and bureaucracy continue to use a variety of "mercantilistic" measures to reduce the chances of foreign firms purchasing Japanese banks, insurance companies, and securities firms Katz , , Consumer Income and Costs Big Bang financial reforms generally have not led to increased consumer income or decreased expenses, but the changes have provided some specific benefits to certain Japanese households. Worries about job security, questions about social welfare programs, and the lack of confidence in the economy and its future have led Japanese consumers to slow spending.
A few employees have benefited from pension law changes under the Big Bang. In , the government allowed the provision of two types of defined-contribution plans company-contribution type and individual-contribution type , similar to the k plans so popular in the U.
These plans serve as alternatives to the defined-benefit pensions currently used by many large companies to complement the public pension system. Employees can decide how funds are invested under these plans, and the continuity of the plans is guaranteed if they change employers Kwan The Big Bang reforms provide wealthy households with a wider range of options for their asset portfolios. However, the reforms in some cases may have had a somewhat negative impact on small savers, who "suffer from deregulation as the various rates brokerage commissions, insurance premiums, bank monthly fees " are relatively higher Ito and Melvin , However, the deregulation of brokerage commissions has benefited all consumers by the drastic reduction in commissions for Internet transactions, and many individual investors now participate in online trading.
Although Japan remains extremely wealthy, it has continued to suffer from low economic growth since Overall progress achieved by Big Bang financial reforms has been modest, and the Japanese government has taken subsequent actions to weaken or delay the effects of some changes. Even though Japan implemented several financial market changes since , Japanese banks, insurance companies, and other financial institutions remain weak with many non-performing loans and with inadequate capital. Although Prime Minister Koizumi has pressed for the rapid disposal of bad loans at banks since he started in April , many within his own party, the LDP, fiercely resist his proposed changes Economist ; a.
Together with Koizumi's proposed policy to dispose of the bad loans, Japan requires improvements in unemployment assistance and worker retraining in order to address the resulting unemployment from weak companies that must restructure or go out of business when required to pay outstanding loans. Little has been accomplished yet to improve social welfare. Several economists for example, Kwan ; Mikuni and Murphy , ; Patrick , 26; Reszat , 4 have reached similar conclusions on what Japan must do to solve its deep financial problems that have lingered for 13 years after the bursting of the speculative bubble in the last half of the s.
The Japanese financial authorities must abandon some long-established practices and values to make significant and lasting changes, but they must do this with consideration of special interest groups, which continue to constitute a major barrier to serious reform. Refresh and try again. Open Preview See a Problem?
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Thanks for telling us about the problem. Return to Book Page. The Deregulation and Revitalization of the Japanese Economy 2. Having spent nearly a decade in recession, the restructured Japanese economy is slowly beginning to grow again, and its systemic reforms are being put to the test.
Now journalist and commentator Declan Hayes examines the fall and rise of Japan's economic infrastructure, starting with the giddy and elusive bubble economy that ultimately sapped the country and other Asian ne Having spent nearly a decade in recession, the restructured Japanese economy is slowly beginning to grow again, and its systemic reforms are being put to the test. Now journalist and commentator Declan Hayes examines the fall and rise of Japan's economic infrastructure, starting with the giddy and elusive bubble economy that ultimately sapped the country and other Asian neighbors dry.
Hayes explores the Western influence on Japan's economic crash, as well as its own faulty use of loans and credit lines secured with vastly over-valued real estate, and other contributors to its financial failures.
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From there he looks at today's Japan, restructuring its economy in accord with American and World Bank dicta, and dealing with the profound social changes necessary to recapture its economic momentum and ensure its continuing dominance as an economic superpower. Hardcover , pages. Published March 1st by Tuttle Publishing first published The Deregulation and Revitalizatiion of the Japanese Economy.
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To ask other readers questions about Japan's Big Bang , please sign up. Lists with This Book. This book is not yet featured on Listopia. Sep 08, Hugh Ashton rated it it was ok Shelves: Not often I give a book such a low rating, and I think it might be as well to explain why.
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- Japan's Big Bang: The Deregulation and Revitalization of the Japanese Economy by Declan Hayes!
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The author has experience of economic upheavals, according to the back flap blurb, and has impressive-sounding academic credentials, but his writing style doesn't show it at all. In an attempt to sound "hip" or something, he ends up using words like "buffoon" to describe the Japanese MoF bureaucrats, and makes statements about them that make me surprised that the editor at Tuttle actually let them go throug Not often I give a book such a low rating, and I think it might be as well to explain why.
In an attempt to sound "hip" or something, he ends up using words like "buffoon" to describe the Japanese MoF bureaucrats, and makes statements about them that make me surprised that the editor at Tuttle actually let them go through without referring to counsel.
Of course, everyone is entitled to feel that MoF staffers are indeed idiotic, or even crooked - but the repeated references to the "no-pan" restaurants etc.
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When you are talking about capital reserve adequacy, etc. Hayes comes over as neither an academic economist nor a journalist, but as a staid academic wearing a tie-dyed T-shirt. The facts are probably accurate if lifted from other unacknowledged sources - including books I have read - a bibliography and an index would also help.
There appears to have been relatively little editing applied to the manuscript - not sure exactly why I say that, though. The general tone of the book is the attitude of Captain Renault in Casablanca: The supreme irony of this is that it praises Nasdaq, etc. It also praises the US and UK's deregulation and the securitisation of mortgages - moves that led, less than a decade later, to the near melt-down of the world's financial system.
There are other books available on the deficiencies of Japan's financial system in the s and s. Try Gillian Tett for example.