NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Institutions, Competition, and Capital Market Integration in Japan

Kris J. Mitchener, Mari Ohnuki

NBER Working Paper No. 14090*
Issued in June 2008
NBER Program(s):   DAE

Using a newly-constructed panel data set which includes annual estimates of lending rates for 47 Japanese prefectures, we analyze why interest rates converged over the period 1884-1925. We find evidence that technological innovations and institutional changes played an important role in creating a national capital market in Japan. In particular, the diffusion in the use of the telegraph, the growth in commercial branch banking networks, and the development of Bank of Japan's branches reduced interest-rate differentials. Bank regulation appears to have played little role in impeding financial market integration.

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