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Developments in Land Prices and Bank Lending in Interwar Japan: Effects of the Real Estate Finance Problem on the Banking Industry

Author

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  • Nanjo, Takashi

    (Institute for Monetary & Econ Studies, Bank of Japan)

Abstract

This paper investigates the relationship between fluctuations in asset prices and the real economic activity in interwar Japan, focusing on the effects of land price movements on the volume of bank lending. When what is called the "real estate finance problem" arose in the 1920s and the beginning of the 1930s, falling land prices may have affected bank lending, possibly due to the reduced collateral value of real estate held by borrowers and the reduced risk-taking capacity of the banking industry caused by impaired equity capital. Fluctuations in land prices and changes in the volume of lending made by ordinary and savings banks show similar developments, and regression analyses including panel data analyses at the prefectural level have indicated a significant relationship between land prices and bank lending. With respect to the equity capital of banking industry, consideration has been given to the scale of losses in real estate collateral loans caused by falling land prices, based on data from the Nihon Kangyo Bank.

Suggested Citation

  • Nanjo, Takashi, 2002. "Developments in Land Prices and Bank Lending in Interwar Japan: Effects of the Real Estate Finance Problem on the Banking Industry," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(3), pages 117-142, October.
    • Handle: RePEc:ime:imemes:v:20:y:2002:i:3:p:117-142
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me20-3-4.pdf
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    Citations

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    Cited by:

    1. Nehls, Hiltrud & Schmidt, Torsten, 2003. "Credit Crunch in Germany?," RWI Discussion Papers 6, RWI - Leibniz-Institut für Wirtschaftsforschung.
    2. Torsten Schmidt & Hiltrud Nehls, 2003. "Credit Crunch in Germany?," RWI Discussion Papers 0006, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    3. Takashi Nanjo & Makoto Kasuya, 2009. "Part-Paid Stock, Corporate Finance, and Investment: Economic Consequences of the Part-Paid Stock System and Supplementary Installments in the Early 1930s of Japan," IMES Discussion Paper Series 09-E-22, Institute for Monetary and Economic Studies, Bank of Japan.
    4. repec:zbw:rwidps:0006 is not listed on IDEAS
    5. Takashi Nanjo & Makoto Kasuya, 2009. "Part-Paid Stock, Corporate Finance, and Investment: Economic Consequences of the Part-Paid Stock System and Supplementary Installments in Early 1930s Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 27(1), pages 219-246, November.
    6. Kasuya, Makoto, 2007. "Bond markets and banks in inter-war Japan," LSE Research Online Documents on Economics 6873, London School of Economics and Political Science, LSE Library.
    7. Makoto Kasuya, 2007. "Bond Markets and Banks in Inter-War Japan," STICERD - International Studies Paper Series 521, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

    More about this item

    JEL classification:

    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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