Lessons from Japan's Banking Crisis, 1991–2005

Mariko Fujii and Masahiro Kawai ()
Additional contact information
Mariko Fujii: Asian Development Bank Institute

No 222, ADBI Working Papers from Asian Development Bank Institute

Abstract: The Japanese government's response to the financial crisis in the 1990s was late, unprepared and insufficient; it failed to recognize the severity of the crisis, which developed slowly; faced no major domestic or external constraints; and lacked an adequate legal framework for bank resolution. Policy measures adopted after the 1997–1998 systemic crisis, supported by a newly established comprehensive framework for bank resolution, were more decisive. Banking sector problems were eventually resolved by a series of policies implemented from that period, together with an export-led economic recovery. Japan's experience suggests that it is vital for a government not only to recapitalize the banking system but also to provide banks with adequate incentives to dispose of troubled assets from their balance sheets, even if that required the government to mobilize regulatory measures to do so, as was done in Japan in 2002. Economic stagnation can cause new nonperforming loans to emerge rapidly, and deplete bank capital. If the authorities do not address the banking sector problem promptly, then the crisis will prolong and economic recovery will be substantially delayed.

Keywords: japan banking crisis; 1990s; bank capital; financial regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-06-29
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-his and nep-reg
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.adbi.org/files/2010.06.29.wp222.lessons ... crisis.1991.2005.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.adbi.org/files/2010.06.29.wp222.lessons.japan.banking.crisis.1991.2005.pdf [302 Moved Temporarily]--> https://www.adbi.org/files/2010.06.29.wp222.lessons.japan.banking.crisis.1991.2005.pdf [302 Moved Temporarily]--> https://www.adb.org/adbi/files/2010.06.29.wp222.lessons.japan.banking.crisis.1991.2005.pdf)

Related works:
Chapter: Lessons from Japan’s Banking Crisis – 1991 to 2005 (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:0222

Access Statistics for this paper

More papers in ADBI Working Papers from Asian Development Bank Institute Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by ADB Institute ().