Conclusion: Informality, monetary policy
and bank performance – lessons from
the Japanese experience
In terms of maintaining order, we feel we have an indisputable, remarkable record.
M. Tsuchida, former Director-General, Banking Bureau, MoF, 19911
The second half of the 1990s certainly will not go unnoticed by Japanese historians. As described in this study, in 1997 and 1998 some of the largest banks and securities houses collapsed, followed in 2000 by bankruptcies of several insurance companies. A large number of scandals shook the foundations of Japan's monetary establishment, and ultimately caused the fall of some of its most respected and powerful representatives. These events severely increased doubts about the health of Japanese financial institutions and the stability of the Japanese financial system as a whole. The developments also resulted in a large number of studies that tried to explain the causes and consequences of the Japanese banking problems. Although some of these publications incorporated analyses of the fundamental characteristics of the Japanese monetary authorities and financial system, to a large extent the research remained limited to investigations of the banking crisis as such, taking little account of broader concepts such as the structure of the government bureaucracy, economic policy and political economy. This study has taken the opposite approach, first developing a qualitative framework which formed the basis for institutional and empirical analysis of several structural informal aspects that may have been partly responsible for the banking problems. I leave it to the reader to judge to what extent this attempt has been successful. I have concentrated particularly on informality for two reasons. Firstly, informality seems to lie at the heart of the discussions on the specific nature of the Japanese political economy and economic system, and thus, secondly, could have major implications for the organisation of Japanese____________________