NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Japanese Finance: A Survey

Jeffrey A. Frankel

NBER Working Paper No. 3156 (Also Reprint No. r1616)
Issued in September 1991
NBER Program(s):   ITI   IFM

Five sets of questions puzzle observers of Japanese financial markets, particularly from the U.S. viewpoint. They concern: the apparently low corporate cost of capital, low real interest rates, high equity prices, high land prices, and the rising real yen. The paper surveys writings on these issues, in brief enough form that one can see how the questions fit together.

Topics covered include: the leverage of Japanese firms, dividend payout, equity price/earnings ratios, corporate taxation, cross-ownership, land price/rental ratios, speculative bubbles, the household saving rate, international capital mobility, expected real appreciation of the yen, the lower cost of financing investment internally and through "main bank" relationships, and the move to a more market-oriented system as these relationships break down.

Conclusions include: (1) the real interest rate in Japan may remain below that in the United States, despite international arbitrage, (2) the main relevant effect of the internationalization in Japan may have been to accelerate the process whereby corporate finance becomes market-oriented, so that (3) affiliated firms are losing the special privilege of borrowing at a cheaper rate, while (4) unaffiliated firms are able to borrow more cheaply than before, and (5) the increased availability of funds for asset-market arbitrage allowed the great run-up in equity and land prices in the 1980s.

download in pdf format
   (846 K)

email paper

This paper is available as PDF (846 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3156

Published:

Users who downloaded this paper also downloaded these:
Goldin The Political Economy of Immigration Restriction in the United States, 1890 to 1921
Leith Chapter VI: Concluding Remarks - Major Lessons of the Ghanaian Experience
Frankel w4050 Is Japan Creating a Yen Bloc in East Asia and the Pacific?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us