ABSTRACT
The dismal statistics have been cited to show the exclusionary behavior of Japan, Inc. In Japan, the role of a primary lender entails obligations well beyond the occasional provision of funds. The Japanese financial community, in particular the Ministry of Finance (MoF), deliberately limited foreign banking activity through most of the post-war era. The MoF used banks to implement industrial policy by funneling capital to designated industries. To function effectively, the system required a close relationship between regulator and regulated. Japanese banks accepted the Ministry’s instructions in return for what amounted to guaranteed profits. Foreign financial institutions had overseas sources of funds. To the extent that foreign capital flooded into the country, Japanese companies would no longer be dependent upon Japanese banks and the MoF for funding. A great deal of misinformation exists over the lack of success of foreign enterprises in Japan.
