Essays on Financial Policies in Japan Assignment

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The paper "Financial Policies in Japan" is a worthy example of an assignment on macro and microeconomics.   Before the 1970s the financial market in Japan was greatly regulated by the government through the ministry of finance. Foreign exchange was tightly controlled and the interest rates closely monitored and controlled by the Ministry of Finance. The entire financial instrument in the economy was highly limited and was under the approval of the ministry. The government had the power to influence the allocation of credit to the industries by the commercial banks.

In other words, its hand was very heavy on controlling the choices of the private sector (Cusumano, 2013). The control over the loan rates, deposit, and strict regulatory authority over Japanese banks meant that the government determined the profitability of the banks. The security market just played a highly speculative and peripheral game as it never had an impact on or corporate behavior or control. At the same time, insurance companies had the ability to extend loans to the same sectors that banks were directing theirs. This limited the competitiveness of commercial banks (Carlile and Tilton, 1998). Before the mid 1970s, the corporations in Japan did not have other sources of funding as loans from abroad were not allowed and the domestic security market had had not fully developed. 1970s, the future growth expectation greatly reduced causing corporations to reduce their rate of borrowing.

A big number of them started channeling the surplus they attained into the newly created open market and started demanding high-interest rates on the deposits. The corporate world in this sense created a need for financial deregulation in the country (Suzuki, Ishida, Nihei, Maruyama, 2010)The city banks' demand to raise funds reduced as loan demand greatly declined.

The reliance on funds from the Bank of Japan by the city banks greatly reduced. Japanese government emerged as a heavy borrower in the economy financial market and created a high deficiency to stimulate the economy following the oil crisis.

References

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Carlile, L. E., & Tilton, M. (1998). Is Japan really changing its ways?: regulatory reform and the Japanese economy. Washington, DC: Brookings Institution Press.

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Suzuki, M., Ito, M., Ishida, M., Nihei, N., & Maruyama, M. (2010). Individualizing Japan: searching for its origin in first modernity. The British journal of sociology, 61(3), 513-538.

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