A Reassessment of Japan's Big Bang Financial Regulatory Reform
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Authors
Aronson, Bruce E.
Issue Date
2011
Volume
Issue
Type
Other Format
Language
eng_US
Keywords
Banking, financial, and investment law , Japan
Alternative Title
Abstract
This paper reassesses the results of Japan‘s financial deregulation over the last two decades. Japan‘s Big Bang sought to transform a highly regulated bank-centered financial system to a transparent, market-centered financial system to revitalize Japan‘s economy and aging society. Prior assessments generally view this reform effort as a failure due to Japan‘s low economic growth rate.
This paper finds, contrary to conventional wisdom, that government-led deregulatory and administrative reform was largely successful in removing legal and administrative obstacles to the development of a market-centered financial system. However, the persistence of past practices by market participants and strong headwinds such as low macroeconomic growth and poor financial market performance prevented achievement of the Big Bang‘s ambitious goals. This illustrates both the limits of what can be accomplished through deregulation of financial markets and the problem inherent in using a results-oriented standard in evaluating Japan‘s reform efforts.
This paper finds, contrary to conventional wisdom, that government-led deregulatory and administrative reform was largely successful in removing legal and administrative obstacles to the development of a market-centered financial system. However, the persistence of past practices by market participants and strong headwinds such as low macroeconomic growth and poor financial market performance prevented achievement of the Big Bang‘s ambitious goals. This illustrates both the limits of what can be accomplished through deregulation of financial markets and the problem inherent in using a results-oriented standard in evaluating Japan‘s reform efforts.
Description
Citation
Bruce E. Aronson, A Reassessment of Japan's Big Bang Financial Regulatory Reform, in Imes Discussion Paper Series (Inst. for Monetary & Econ. Studies, Bank of Japan, Discussion Paper Ser. No. 2011-E-19, 2011).
Publisher
Institute for Monetary and Economic Studies, Bank of Japan