ABSTRACT
The early 1990s provided the Department of the Treasury with unique opportunities to promote reform of the Japanese financial system. Foreign financial institutions had an open window and an opportunity to pierce the domestic markets, if they were willing to take it. The bailout came at an inopportune time for the Industrial Bank of Japan. By the 1990s, many of the barriers that had plagued foreign banks were gone. When Japanese banks were allowed to make impact loans in the late 1970s, the market share of foreign banks plummeted. The most significant reforms of the Japanese financial system in the post-war era proceeded apace, with legislation to decompartmentalize the financial sector finally passing the Diet. Financial reform had become necessary to manage the financial system. Japanese banks possessed considerable quantities of stock, purchased in large part to solidify business relationships, at a time when prices were low.
