NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mitsuhiro Fukao

Faculty of Business and Commerce
Keio University
Mita 2-15-45
Minato-ku, Tokyo 108-8345
JAPAN
Tel: +81-3-3945-3520
Fax: +81-3-5427-1578

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NBER Working Papers and Publications

September 2006Financial Strains and the Zero Lower Bound: The Japanese Experience
in Monetary Policy with Very Low Inflation in the Pacific Rim, NBER-EASE, Volume 15, Takatoshi Ito and Andrew K. Rose, editors
January 2003Financial Sector Profitability and Double-Gearing
in Structural Impediments to Growth in Japan, Magnus Blomström, Jennifer Corbett, Fumio Hayashi and Anil Kashyap, editors
December 2002Financial Sector Profitability and Double-Gearing
w9368
In this paper, I show that Japan will not be able to have a viable banking sector without stopping deflation. The banking industry has not shown a profit since fiscal 1993 (ended March 1994) if one excludes capital gains from stock and real estate portfolios. I quantify the financial condition of the sector and show that interest margins have been too low to cover the increase in loan losses brought about by the weak economy. Banks cannot raise margins for several reasons: competition with subsidized government sponsored financial institutions (GFIs); intense political pressure, backed by the Financial Services Agency (FSA), to make new loans to small and medium companies; and deflation-weakened borrowers. I expect that the Japanese government will have to nationalize most of the banking...

Published: Financial Sector Profitability and Double-Gearing, Mitsuhiro Fukao. in Structural Impediments to Growth in Japan, Blomström, Corbett, Hayashi, and Kashyap. 2003

 
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