ABSTRACT
Introduction During the so-called bubble economy of the late 1980s, Japanese banks commanded high respect throughout the world. One reason for this was that, even if they had small nominal equity capital, their stock holdings were evaluated at book value, such that they held massive hidden reserves that approached 200 trillion yen. At the same time, major banks had developed close relationships with major corporations, so they had little concern that their customers would be enticed away by other financial institutions. Moreover, real estate was often used as collateral for loans. In addition to the low rate of corporate bankruptcies and irrecoverable loans, continual rises in land prices provided ample leeway for debt collection by disposal of collateral. Thus, the prospect of bad debts becoming a problem for Japanese banks was not a common concept. Furthermore, the majority of household financial assets were held as savings deposits in institutions such as banks, making the leading banks in Japan prominent globally for their asset holdings.
