Financial Crisis and Bank Management in Japan (1997 to 2016) (eBook)

Mitsuhiko Nakano is a Professor at St. Andrew’s University in Japan. His research interests focus specifically on the themes of banking and business systems, banking management, and financial administration policy. Having worked at a major bank during the period of time covered in this book, he uses his own extensive practical experience to analyse the economic effects of banking.

Dedication 6
Preface 8
Acknowledgements 11
Contents 13
Frequently Used Abbreviations 17
List of Figures 19
List of Tables 21
1: Financial Crisis and Banking Crisis in Japan: 1997–2003 23
1.1 Introduction 23
1.2 Outline of the Banking Structure in Japan 24
1.3 The Bubble Economy and Its Collapse 26
1.3.1 The Three Causes of the Bubble Economy 26
1.3.2 Bank Behaviour 30
1.3.3 Collapse of the Bubble Economy 34
1.4 Financial Crisis 35
1.4.1 The Shinkumi Crisis 35
1.4.2 The Jusen Crisis 38
1.4.3 Successive Collapses During Bloody November 40
1.4.4 Collapse of the Two Long-Term Credit Banks 42
1.5 Restructuring of City Banks 44
1.5.1 Injections of Public Funds Three Times 44
1.5.2 The Shinsei Shock 45
1.5.3 Births of Megabank Groups 46
1.5.4 The Zenecon Crisis 46
1.5.5 The Resona Shock 47
1.5.6 The UFJ Crisis 49
1.6 Conclusion 50
References 54
2: Change in Banking Supervision Policy and Their Effects on Bank Behaviour: 2002–05 55
2.1 Introduction 55
2.2 Change of Banking Supervision Policy 55
2.2.1 Change of Banking Supervision Authority 55
2.2.2 The Financial Big Bang in Japan 58
2.2.3 Programme for Financial Revival 60
2.3 Bank Behaviour and Loss of Autonomy 63
2.3.1 Dissolution of the Mutual Shareholding System 63
2.3.2 Disposal of NPLs 64
2.3.3 Collection of NPLs 67
2.3.4 Revitalization of Failed Firms 68
2.3.5 The Second of the Basel Accords 69
2.3.6 Change of Bank Behaviour and Loss of Autonomy 70
2.4 Structural Reforms in Economic and Social Systems in Japan 75
2.4.1 Excessive Surpluses in the Three Economic Elements 75
2.4.2 Backbone Design for Economic System Reforms 76
2.4.3 Acts of Insolvency and the Accounting System 79
2.4.4 Employment System 81
2.5 Conclusion 84
2.5.1 [Column] The Issue of the 30 Failed Firms 86
2.5.2 [Column] The Saiken Hoki Method 86
References 88
3: The Lehman Shock and Its Influence on Banking Supervision Policy: 2008–13 89
3.1 Introduction 89
3.2 Deflation in the 2000s 90
3.2.1 Definition of Deflation 90
3.2.2 Trend of Deflation 90
Trend of CPI and GDP Deflator 90
Price Changes by Product 91
3.2.3 Dispute of Aggregated Prices 93
3.2.4 Wage Deflation 94
Trend of Wages and Salaries 94
Background of Wage Deflation 96
3.3 Monetary Policy of the BOJ 98
3.3.1 Monetary Policy After the Collapse of the Bubble Economy 98
Pre-financial Crisis Period 98
Banking Crisis Period 99
The Longest Economic Expansion Period 101
3.3.2 Effects of the BOJ Policy 105
Effects of the Zero Interest Rate Policy 105
Effects of Quantitative Monetary Policy 107
3.4 The Lehman Shock and the Great East Japan Earthquake 110
3.4.1 The Lehman Shock 110
3.4.2 The Great East Japan Earthquake 116
3.5 Portfolio of the Banks 118
3.5.1 Small Rebalance of an Asset Portfolio 118
3.5.2 Decline of Interest Margin 120
3.6 Conclusion 125
References 126
4: The Launch of Abenomics and Its Effects on the Banking Business 128
4.1 Introduction 128
4.2 Launch of Abenomics 129
4.2.1 Economic Situation of Pre-Abenomics 129
4.2.2 Three Arrows 131
Monetary Policy 131
Fiscal Policy 133
Growth Policy 135
4.2.3 Theoretical Background 137
4.2.4 Arguments 139
4.3 Effects of the New Monetary Policy 140
4.3.1 Financial Markets 140
4.3.2 The Second Bazooka 142
4.3.3 Banking Business 144
Portfolio Rebalance 144
Decline of Yields 145
Overseas Lending 147
4.4 Three-Year Results of Abenomics 150
4.4.1 Macro Economy 150
CPI 150
Employment 151
Corporate Profit 152
Tax Revenue 153
4.4.2 Defects of Abenomics 154
Labour Share 154
Divergence Among Firms 155
Growth Strategy 155
New Three Arrows 156
4.4.3 QQE with a Negative Interest Rate 156
4.5 Conclusion 159
4.5.1 [Column] Political Background of Prime Minister Abe 160
References 161
5: The Future of Banking Management in Japan 162
5.1 Introduction 162
5.2 Funds Flow and Its Future 163
5.2.1 Funds Flow 163
5.2.2 Outstanding Balance of Financial Assets 165
5.3 Structural Issues of the Japanese Economy 167
5.3.1 Population Decline 167
5.3.2 Deterioration of the Local and Peripheral Economies 170
5.4 Development of the Financial Industry 173
5.4.1 Capital Markets 173
5.4.2 Shadow Banking System 175
5.4.3 Retail Financial Business 176
5.4.4 Crowdfunding 178
5.5 The Japanese Banking Business of the Future 180
5.5.1 Banking Business in the Future 180
5.5.2 Megabanks 181
Domestic Business 181
Overseas Business 184
5.5.3 Regional Banks 188
5.5.4 Small Financial Institutions 191
5.6 Conclusion 192
References 196
6: Conclusion 197
Index 201