In Search of "Capital Crunch": Supply Factors Behind the Credit Slowdown in Japan

David Woo

No 1999/003, IMF Working Papers from International Monetary Fund

Abstract: The seeming failure of loose monetary policy to reactivate Japan’s economy has led some observers to suggest that the usual credit channels through which monetary policy affects the real economy are blocked, and this because of a pervasive shortage of bank capital that has induced a leftward shift in the supply of bank credit: the so called credit crunch hypothesis. This paper finds support for the hypothesis in the 1997 bank data—a year during which the landscape of the Japanese financial system was changed fundamentally—but finds no, or even contrary, evidence, for most of the 1990’s.

Keywords: WP; bank; loan; securities holding; capitalized bank; Japanese Banks; Credit Crunch; Bank Capitalization; bank capital; loan growth; long-term credit bank; city bank; trust bank; reserve cover; bank data; capital base; loss reserve cover; developments bank; Capital adequacy requirements; Loans; Bank credit; Credit; Nonperforming loans; East Asia; South Asia; bank restructuring package (search for similar items in EconPapers)
Pages: 28
Date: 1999-01-01
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Citations: View citations in EconPapers (32)

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