Problems in the Japanese Financial System in the Early 1990s

Abstract

The Japanese financial system is now undergoing many serious problems due to the col-lapse of the "speculative bubble" which occurred at the start of the 1990s. Most of these problems were caused by the excessively expansionary policy of major Japanese financial institutions during the boom period of the late 1980s as well as the expansionary monetary policy pursued during that time. This paper describes several aspects of the current problems including the recent changes in the financial system, these effects on the economy, and the relationship with the re*'ulatory authorities. It also eva]uates the soundness and competitiveness of Japan's financial system in the international context towards the future.