Measuring Concentration in the Japanese Loan and Deposit Markets

Iichiro Uesugi, Kazuki Hiraga, Masashi Manabe and Naoyuki Yoshino ()

No DP22-4, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: This study is the first to exhaustively calculate the degree of concentration in regional banking markets using the outstanding amount of loans and deposits at branches and headquarters of financial institutions located in Japan. Calculating the Herfindahl-Hirschman Index (HHI) for loans and deposits for each prefecture and for each urban employment area for the period 2005–2019, we show differences in the HHI across regions and its development over time. Furthermore, we decompose HHI into two factors, namely one related to the number of financial institutions and the other to deviation from the mean market share.We also examine the extent of the increase in the HHI caused by mergers of financial institutions and its persistence. The main results obtained are as follows. First, loan and deposit HHI show an upward trend; however, the HHI of loans in large metropolitan areas, which were already low, show a trend of further decline. Competition among financial institutions becomes tougher in large metropolitan regions. Second, increases in HHI are not only due to reductions in the number of financial institutions but also to increasing variations in financial institutions’ market share. And third, while the increase in loan HHI due to financial institution mergers is sustained for a certain period, its duration tends to be shorter in regions with a low market concentration.

Keywords: Herfindahl-Hirschman Index; Market concentration; Competition; Financial institution mergers (search for similar items in EconPapers)
Pages: 50 pages
Date: 2022-03
New Economics Papers: this item is included in nep-ban, nep-com and nep-ure
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Citations: View citations in EconPapers (2)

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Journal Article: Measuring concentration in the Japanese loan and deposit markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:rcesrs:dp22-4

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