The Failure of the Japanese "Big Bang": Bureaucracy-Driven Reforms and Politician Intervention

Itaru Okamoto

Japanese Economy, 2005, vol. 33, issue 1, 69-106

Abstract: The "financial big bang" of the late 1990s strove to fundamentally liberalize the Japanese financial system and create a free, fair, and global financial market. However, as is now evident from the stagnation of the stock market and the bad debt problems of Japanese banks, those reforms have not accomplished their desired ends. The question is: Why? This article attributes the failure of the big bang to the inability of the reforms to go beyond liberalizing the securities industry by challenging the government's protection of the banking sector, and to the government's haphazard intervention in the stock market. The article concludes that these are all problems of "financial gover-nance," that is, the reforms were "bottom-up," implemented at the initiative of the Securities Bureau of the Ministry of Finance (MOF), and politicians intervened in financial administration after the MOF was broken up.

Date: 2005
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DOI: 10.1080/2329194X.2005.11045212

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