ABSTRACT
Many people believe the financial “Big Bang” ushered in a new era. Japan’s bank-dominated financial system doesn’t do either job very well. While the banks suck up savings like a vacuum cleaner, they’ve never been all that good at allocating capital. Government bodies take in 46 percent of all deposits, up from 35 percent in 1990. Bankers and insurers complain that the government’s cut-rate programs are destroying their profits, since they must cut their own margins to stay in the game. Despite pledges in the Big Bang that markets would be “fair, free, and global,” Tokyo continues to engage in stock market manipulation. Bank deposits have long been a sucker’s game, with regulated rates deliberately held below the rate of inflation as a subsidy to business investment. Theoretically, the best long-term investment for households is stocks. Households used to own 55-60 percent of stocks back in the 1950s, but as cross-shareholding increased, the household share plummeted to only 20 percent.
