Monitoring the Monitors: Are Old Boys Networks Being Used to Monitor Japanese Private Banks? (original) (raw)

Amakudari: The Post-Retirement Employment of Elite Bureaucrats in Japan

Journal of Public Economic Theory, 2012

This paper analyzes the amakudari practice in Japan. Amakudari refers to situations where government agencies contact the private firms that they regulate, asking them to provide employment for their retiring elite bureaucrats. Upon employment at the private firms, bureaucrats may collude with their former employers to secure lucrative government contracts, avoid regulatory inspections, or obtain preferential treatment. This paper provides an explicit formalization of the implicit collusion between the regulator and the regulated.

The Myth of the Main Bank: Japan and Comparative Corporate Governance

SSRN Electronic Journal, 2001

In this essay on Masahiko Aoki's recent study of Japanese corporate governance, we argue that he and others misdescribe Japan on several fundamental dimensions. First, Japanese firms and employees choose neither to arrange implicit life-time employment contracts nor to invest heavily in firm-specific skills. Instead, firms keep employees employed during economic downturns only because interventionist courts do not let them lay their employees off. Second, Japanese firms do not organize themselves into keiretsu corporate groups, do not exchange shares with other alleged group members, and do not necessarily use the money-center bank attributed to the group as their "main bank." Last, Japanese "main banks" neither agree in advance to rescue troubled debtors nor monitor firms on behalf of other creditors.

Purifying Japan's Banks: Issues and Implications *

Asian Economic Papers, 2006

We use a simple real options framework and empirical data to establish that although Japanese banks hold borrowers' shares, their interest is more aligned as a contractual claimant than a residual claimant of corporations. We then explain why the Japanese model of corporate governance was useful during the 'catching up' growth of that country's postwar reconstruction decades, but became problematic subsequently. The interests of shareholders, creditors, workers, and managers are more readily aligned because such growth entails investment in known-technology physical capital-intensive projects with highly predictable cash flows. Once on the technological frontier, 'keeping up' growth requires risk taking and a tolerance for 'creative destruction'. This is better accommodated by entrusting corporate governance to firms' true residual claimants, their shareholders.

Who declares the demise of the Japanese main banking system?

Journal of Banking Regulation, 2002

in Japan. During his stay in London, he contributed to the House Treasury and Civil Service Committee, 'A view on securitisation'. His last paper in this journal appeared in the March 1999 issue, coauthored with Yutaka Tajima and entitled 'Japanese banking law in global perspectives'.

Governance, globalization and the Japanese financial system

Routledge eBooks, 2005

The governance of the financial system in Japan-especially the relationship between governments and banks-has been at the core of the way the developmental state has worked over the past half-century. In the age of 'Japan, Inc.', how money, especially investment capital, was allocated between different uses involved a largely closed shop of bureaucrats, politicians, banks, stock markets and firms, insulated from international financial markets and locked into government-backed, quasi-oligopolistic competition at home. However, with increasing international economic interdependence and openness-especially the huge upsurge in international capital mobility since the 1970s and the global integration of financial markets and price sensitivity across borders-that closed shop is being contested from both outside and inside. Financial governance in Japan has been on the threshold of fundamental restructuring for at least a decade, probably two or three. Yet, despite a wide range of particular measures having been adopted since the 1970s, particularly the 'big bang' reforms of the mid-1990s, that restructuring is still to a large extent on hold while academics, politicians, bureaucrats, the media and a range of interest and pressure groups debate how, and how far, to change long-entrenched practices and relationships focused on both the site and mechanisms of financial governance. Specific changes over the past ten years or so include:

The Political Economy of Japanese Financial Markets: Myths versus Reality

Foreign Affairs, 1999

Ama-kudari Private sector and quasi-government organization posts which 'fall from heaven' to former bureaucrats. Bakufu Effectively the central government which emerged during the Edo period which kept potentially rivalrous feudal factions at bay and de facto usurped the authority of the emperor. Bakuhan The coordinated administration of the bakufu or central government and the han, or fief. The historical antecedent of coordinated central and local government. Daimyo Feudal lord. Endaka Strong yen. Used to describe the secular rise in the value of the yen as well as periodic bouts of yen strength. Gaiatsu Foreign pressure, such as diplomatic pressure. Gaimuin Qualified or certified securities salesperson. Gensaki A repurchase agreement (Repo) instrument. Essentially a free rate short-term money market instrument. Han Feudal fief. Jusen Mortgage home loan affiliates of Japanese banks. A non-bank structure. Kan-eki Hoken The Postal Insurance Corporation. Keiretsu The form of corporate grouping prevalent in modern Japan, characterized by cross shareholdings, a main bank and usually affiliated with a trading house. Member xii firms are typically from a variety of business lines. The major groups are directly descended from the prewar zaibatsu. Kinyu Keiretsu Financial grouping, and typically just the more formal name for keiretsu. Kokumin Nenkin Public 'social security' type pension or old age support. Komeito The political party affiliated with the Sokka Gakkai Buddhist sect. Calls itself the 'Clean Government Party' in English, though its record on scandals is highly spotted. Kosei Nenkin Publicly administered pension plan. Mabiki 'Culling of weeds'. An ancient euphemism in Japanese for infanticide. Maru-yu A type of tax-free savings account, now highly restricted but previously available to nearly anyone. Minshu-to Democratic Party. One of the newer parties to emerge or re-emerge since 1993. Traces its roots to the Democratic Party of the immediate postwar. Nihon keizai shinbum The major daily financial paper in Japan. Nokyo Generic term for agricultural cooperative. Some of these are very large and powerful. Sankin Kotai The system of friendly hostage-taking employed by the Tokugawa shogunate during the Edo period to ensure loyalty of the daimyo of the various han. The daimyo would have to leave key family members in the capital city of Edo (Tokyo) for specified periods of time. This acted as insurance against attack, and financially weakened the daimyo. Sarakin Loan shark. Sogo Shosha Trading house. Terakoya Temple school in ancient times. Tokkin Fund Short-term investment trust. Zaibatsu The prewar Japanese equivalent of the American trusts of the early twentieth List of Japanese Terms and Acronyms xiii century. These family held conglomerates typically included banks, trading houses and a variety of manufacturing and retail entities. Zaitech A Japanese-English term blending the Chinese character 'zai' for finance with tech for technology. Financial engineering. ACRONYMS BIS Bank for International Settlements. The international organization based in Basle, Switzerland and now charged with international banking regulation among member states. The principles upon which the regulation is based, essentially capital adequacy ratios, is the basis of the so-called Basle Accord. Participants typically alternate between use of the terms 'BIS regulations' and 'Basle Accord'. BoJ Bank of Japan, the Japanese central bank. CD Certificate of deposit. Traditionally, these have been large denomination deposits with unregulated interest rates. The term is a holdover from the days of phased in deregulation, when markets for larger participants were deregulated first. Today, most mature economies have largely unregulated interest rate environments and CDs are no longer prevalent. CPI Consumer price index, an index with base measure of 100 which tracks how prices of a selected bundle of consumer goods have moved since the base year. This index is the most common basis for the calculation of inflation measures. EPS Earnings per share. FILP Fiscal Investment and Loan Programme. The socalled 'second budget' for the Ministry of Finance. Uses proceeds from the Postal Savings and invests them in a variety of projects and quasi-government programmes. Potentially a massive pool of nonperforming loans.

From developmental to regulatory state? Japan's new financial regulatory system

The Pacific Review, 2006

Recent financial reforms in Japan and elsewhere in Asia represent, for various authors, a fundamental shift in financial governance and in state-business relations in the region. The old 'developmental' state in East Asia has supposedly made way for a neoliberal, 'regulatory' state, with its emphases on agency independence and the nondiscretionary enforcement of rules. I show in this paper that this interpretation exaggerates the extent of the transformation in the important case of Japan. Although the outward institutional forms of economic governance in Japan, as with many Asian developing countries, has changed dramatically since the mid-1990s, discretion still remains at the core of economic and financial policy. In the area of Japanese banking regulation and supervision, I show how this highly discretionary application and enforcement has been consistent with domestic political pressures. The result is a substantial divergence between superficial convergence upon international regulatory standards and underlying behaviour. I also give reasons why globalization does not mean that this hybrid regulatory model is unsustainable.