Japan's New Role In Global Finance

• Published in: MIT Sloan management review 1988-10, Vol.30 (1), p.73
• Main Author: Inouye, Minoru
• Format: Article
• Language: English
• Subjects: Banking industry; Banks; Deregulation; Financial institutions; International finance; Money markets
• ISSN: 1532-9194

Bank executives in Japan have seen a dramatic evolution in their banking environment since the mid-1970s. Underlying this change has been the trend toward integration and globalization of financial markets and the rapid rise of Japan to preeminence in the world economy. Japanese banks and regulators have tried to change and adapt gradually without putting an undue strain on the domestic credit system. The deregulation of interest rates and the desegmentation of financial institutions are the 2 main components of financial deregulation in Japan. Between 1945 and 1984, strategic goals for Japanese bank executives were measured in terms of expansion in size. The need for limiting quantitative expansion was not apparent to the Japanese banks until 1987, when international requirements were set for minimum bank capital, and the standards used to measure capital adequacy were converged. In early 1988, a new management strategy was adopted by the Japanese city (commercial) banks using performance targets that stress "return on assets" criteria.