Rethinking Japan's Bad Loan Management: Implications from a Comparison with the Swedish Case

Japan and the Nordic countries similarly experienced a serious collapse of the Bubble economy in the early 1990s, but the financial recovery of the former is extremely delayed compared with the latter. In Japan, the Ministry of Finance is often accused of this, with the claim that it has acted too arbitrarily. The assumption is that it has held, or had held at least until recently, excessively strong power in the policy-making process, based on the close connection with banks and politicians. However, the close connection between relevant actors may also reduce the scope of their performance. If the policy-making process is conceptualized as the network linking relevant public/ private actors, the Japanese financial authorities are rather seen as “trapped” into sticky relations with other actors in the network. As suggested in the literature of social network and social learning, too close and too closed connections may deteriorate the learning competence of the actors in the network, partly because their action tends to be restricted and partly because they tend to get less information from outside. This theory seems to be strongly supported by the evidence of Japan and Sweden.