Economic Perspectives and Accounting Issues of Japanese Banks’ Non-performing Loans

This paper examines the problems of non -performing loans within Japanese banks from the viewpoint of both economic and accounting aspect. In the background of the accumulation of non-performing loans, one cannot disregard the delay of economic recovery and the fall in land prices. I conclude that there are some constitutional problems concerning banking system such as the convoy system, existence of a main bank relationship, and insufficient information disclosures. Although the reforms of accounting regulation and tax law and so on are also advanced, it has not been possible to make this critical balance sheet healthier. Consequently, Banks must implement a policy to convert funds derived from real estate into new available credit in order to substantially improve the balance sheet.