ABSTRACT
J. P. Morgan in some respects represented an ideal candidate to pierce the shoji curtain. Trusting the advice of agents in the country, J. P. Morgan began lifting the exposure limits for Japan, permitting increased lending to Japanese companies and banks. To compete with Japanese banks for loans in the domestic economy, foreign banks needed a supply of yen. Japanese banks, however, lacked the branch network and the creditworthiness to tap international capital markets. Japanese banks guaranteed repayment, a promise implicitly backed by the government. With the guarantee, foreign banks had no need to assess or worry about the creditworthiness of a Japanese borrower. Moreover, much of the business came through Japanese banks, placing a premium on the relationships. Loans were arranged by a small group of brokers, known as Tanshi brokers. They remained in contact with, and were susceptible to influence by, the Bank of Japan.
