ABSTRACT
Japanese companies became increasingly dissatisfied with the low rate of return on deposits inside the country. Reform of the Japanese financial markets during the post-war era amounted to a relatively complex affair. Japanese banks opposed the changes and when occupation officials declined to promote the reforms, they quickly disappeared. Consensus building meant that reform was a long-term process. Japanese companies suddenly found themselves subject to unaccustomed exchange risks; the Ministry of Finance (MoF) suddenly found itself having to defend the yen in international capital markets. Disconcerting though the Nixon shocks proved to be, the Japanese financial sector was even more convulsed by the first oil crisis. By the end of the 1970s, Japanese banks confronted a system highly regulated and rigidly compartmentalized. The MoF reacted by overreacting, essentially shutting down overseas lending activities by Japanese banks.
