Are Japanese Firms Becoming More Independent from Their Banks?: Evidence from the Firm-Level Data of the "Corporate Enterprise Quarterly Statistics," 1994-2009

The Ministry of Finance's "Corporate Enterprise Quarterly Statistics" (Hojin kigyo tokei kiho) is the only statistical source of well-balanced information about the financing behavior of Japanese firms. Indeed, there are few comparable sources available anywhere in the world. Using this firm-level data set from 1994 to 2009, I investigate the financing behavior of Japanese firms with over \10 million in paid-in capital. The conclusions contrast sharply with the conventional wisdom. Much of the research and policy discussions about Japanese finance begin from the premise that banks play a decisive role in firm behavior. This paper shows that firms have maintained a dependence on financial institutions well below the level that the conventional wisdom has claimed. Under the recent "zero-interest-rate, quantity easing" monetary policy, this "independence of the firms from the banks" has increased further. This tendency is clearest among the smaller firms. In turn, this first conclusion raises doubts about the plausibility of the basic premise of research and policy debate on financial issues, and leads us to question whether observers may not have confused a "crisis of financial institutions" with a "financial crisis". Investigation into firm financing behavior under the "financial crisis" from the end of 1997 to the beginning of 1999 does indeed suggest that it was a fiasco caused by the confusion of a "crisis of financial institutions" with a "financial crisis".