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The Future of the Japanese Financial System

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  • Franklin Allen

Abstract

The purpose of this paper is to consider the strengths and weaknesses of the Japanese financial system and to propose possible changes for the future. The apparent reversal in opinions on the effectiveness of the Japanese and US financial systems in recent years suggests a long term view should be taken. All financial systems have problems in the short term and it is important not to put too much weight on these. Section 2 briefly considers the historical development and the current differences between the Japanese and US financial systems. Section 3 considers the functions of a financial system and how the Japanese and US systems have performed these functions. Suggestions for reforms for Japan are outlined in Section 4 and Section 5 contains concluding remarks. This paper was presented at the Financial Institutions Center's October 1996 conference on "

Suggested Citation

  • Franklin Allen, 1996. "The Future of the Japanese Financial System," Center for Financial Institutions Working Papers 96-56, Wharton School Center for Financial Institutions, University of Pennsylvania.
    • Handle: RePEc:wop:pennin:96-56
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    File URL: http://fic.wharton.upenn.edu/fic/papers/96/9656.pdf
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    References listed on IDEAS

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    8. Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1.
    9. Allen, Franklin & Gale, Douglas, 1997. "Financial Markets, Intermediaries, and Intertemporal Smoothing," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 523-546, June.
    10. Franklin Allen & Stephen Morris & Andrew Postlewaite, "undated". "Finite Bubbles with Short Sale Constraints and Asymmetric Information (Reprint 042)," Rodney L. White Center for Financial Research Working Papers 16-92, Wharton School Rodney L. White Center for Financial Research.
    11. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    12. Franklin Allen, "undated". "Stock Markets and Resource Allocation (Reprint 036)," Rodney L. White Center for Financial Research Working Papers 15-92, Wharton School Rodney L. White Center for Financial Research.
    13. Mayer,Colin & Vives,Xavier (ed.), 1993. "Capital Markets and Financial Intermediation," Cambridge Books, Cambridge University Press, number 9780521443975.
    14. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    15. Franklin Allen & Gary Gorton, 1993. "Churning Bubbles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 813-836.
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    Cited by:

    1. Kojima, Koji & Adhikary, Bishnu Kumar & Mitra, Ranjan Kumar, 2017. "Does equity holding by main banks affect the earnings quality of client firms? Empirical evidence from Japan," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 56-73.
    2. repec:dgr:rugsom:02e40 is not listed on IDEAS
    3. Vidhan K. Goyal & Takeshi Yamada, 2004. "Asset Price Shocks, Financial Constraints, and Investment: Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 77(1), pages 175-200, January.
    4. Jong, Eelke de & Semenov, Radislav, 2002. "Cross-country differences in stock market development : a cultural view," Research Report 02E40, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. John Shuhe Li, 2003. "Relation‐based versus Rule‐based Governance: an Explanation of the East Asian Miracle and Asian Crisis," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 651-673, September.

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