ABSTRACT
The yen/dollar talks succeeded in part because of the rare intercession of Japanese politicians into an area ordinarily left to the expertise of the Ministry of Finance (MoF). Through most of the post-war period, financial reform represented a bureaucratic affair. Some have stressed the omnipotence of the powerful Ministry, an understandable description given the MoF’s central role in the financial system. The MoF therefore often amounts to little more than a spokesperson for banks and securities firms. Although limited by the need for a consensus, however, the MoF does play a proactive role in the financial reform process. Japanese banks, particularly city banks, often encouraged foreign banks to take the lead on reform matters. Foreign pressure therefore represented a device used by segments of the Japanese financial system to advance reform. Acceding additional powers to foreign banks invariably led to demands from Japanese financial institutions for comparable authority, generating pressure for systemic reform.
