ABSTRACT
While Japanese banks seem to have disciplined corporate borrowers toward efficient management in the high-growth era, the enormous numbers of non-performing loans that have arisen since the early 1990s show that they are far from effective in monitoring their client firms. The sharp contrast between the banks’ admirable performance during the high-growth period, when they mediated between ultimate lenders and borrower firms, and their miserable showing since the early 1990s, is a puzzle to those who are interested in how the financial system has contributed to industrial development. Can we offer a consistent explanation for the ups and downs of the Japanese banking sector through the postwar period?
