ABSTRACT
This chapter reviews the development and characteristics of Japan’s bank-centered financial system and the financial deregulation during the 1980s and 1990s. It examines the persistence of the systemic support from the government and banks to financially distressed companies with reference to several major examples of both corporate rescues and bankruptcies after the financial deregulation and crisis in the late 1990s as well as other forms of systemic support in the financial system. The chapter explores the question of why systemic support has been persistent in Japan. The distinguishing characteristics of the Japanese financial regulatory regime that re-emerged in the 1950s and 1960s entailed a strong bias towards bank-centered financing, rigid segmentation of financial institutions by functional type, administrative guidance, the “escorted convoy method” of regulation, and international isolation. The Japanese corporate bond market in the early post-war period was under the control of the Bond Issue Arrangement Committee, which was virtually dominated by the major banks.
