Non-performing Assets of Banks and Financial Intermediation: Experiences of Japan in the Inter-war Period

Munehisa Kasuya
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Munehisa Kasuya: Kobe University

Kobe Economic & Business Review, 1999, vol. 43, 119-146

Abstract: The Japanese banks are now holding a lot of non-performing assets as asset prices fall. The Japanese banks were also holding a large amount of nonperforming assets in the inter-war period. The experiences of Japan in the interwar period may provide useful lessons for the problem of today's Japanese banks. In this paper, we consider what effects the non-performing assets of the Japanese banks had on the financial intermediation in the inter-war period. In addition, we analyze economic meanings of those effects. We can infer from several evidences that- there were the deterioration of financial intermediation in the inter-war period. According to the experiences in the inter-war period, we can also infer that the prompt action in required collection and required redemption of non-performing assets might be effective in the recovery of financial intermediation.

Keywords: asymmetric information; monetary policy; transmission mechanism; agency costs; credit channel; deposit channel; financial intermediation; Japanese banks (search for similar items in EconPapers)
JEL-codes: E51 G21 G28 N15 (search for similar items in EconPapers)
Date: 1999
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