The measurement of financial intermediation in Japan

• Published in: Japan and the world economy 2008, Vol.20 (1), p.40-60
• Main Authors: Capelle-Blancard, Gunther, Couppey-Soubeyran, Jézabel, Soulat, Laurent
• Format: Article
• Language: English
• Subjects: Capital market; Capital markets; Disintermediation; Economics and Finance; Financial economics; Financial intermediaries; Financial liberalization; Financial system; Financial systems; Humanities and Social Sciences; Intermediaries; Japan
• ISSN: 0922-1425; 1879-2006
• DOI: 10.1016/j.japwor.2006.08.005

In this paper, we examine the evolution of the Japanese financial structure, in order to challenge the expected incidences of the financial liberalization. We compute financial intermediation ratios for Japan (1979–2004) on a book value basis. According to our results, the intermediation ratio has remained quite stable, at around 85%. This stability is the result of two opposite trends: a decrease in credits and an increase in financial securities owned by financial (mostly, non-banking) institutions. These two trends are partly the consequence of the heavier weight of the Government in domestic external financing, which is traditionally less financed by credits than companies are. Besides, these two trends would not have appeared if we had used intermediation ratios in market value or other traditional indicators (Deposits/GDP, Loans to private sector/GDP, stock market capitalization/GDP, etc.). Our results provide evidence for a very close relationship between intermediate financings and market financings and tend to reject the hypothesis of the Japanese financial system's convergence toward a capital market-based system.