ABSTRACT
The governance of the financial system in Japan – especially the relationship between governments and banks – has been at the core of the way the developmental state has worked over the past half-century. In the age of ‘Japan, Inc.’, how money, especially investment capital, was allocated between different uses involved a largely closed shop of bureaucrats, politicians, banks, stock markets and firms, insulated from international financial markets and locked into government-backed, quasi-oligopolistic competition at home. However, with increasing international economic interdependence and openness – especially the huge upsurge in international capital mobility since the 1970s and the global integration of financial markets and price sensitivity across borders – that closed shop is being contested from both outside and inside. Financial governance in Japan has been on the threshold of fundamental restructuring for at least a decade, probably two or three. Yet, despite a wide range of particular measures having been adopted since the 1970s, particularly the ‘big bang’ reforms of the mid-1990s, that restructuring is still to a large extent on hold while academics, politicians, bureaucrats, the media and a range of interest and pressure groups debate how, and how far, to change long-entrenched practices and relationships focused on both the site and mechanisms of financial governance.
