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The Rise of Deferred Tax Assets in Japan: The Case of the Major Japanese Banks


Douglas J. Skinner


The University of Chicago - Booth School of Business

August 1, 2005

Journal of Accounting & Economics (JAE), Forthcoming

Abstract:     
This paper describes the role that accounting for deferred taxes has played in the ongoing financial crisis among the major Japanese banks, as dramatized most vividly by the recent collapse of Resona Bank. I argue that deferred tax accounting: (1) has been used by the Japanese Government, including bank regulators, to help give the major banks collectively the appearance of financial well-being in spite of their economic difficulties, and (2) that managers of these banks have used deferred tax accounting to bolster their banks' regulatory capital levels when their economic circumstances deteriorate. I present evidence that is generally consistent with these arguments, supporting economists' views that accounting has played a role in helping the Japanese Government to postpone the politically difficult task of reforming the major banks.

Number of Pages in PDF File: 58

Keywords: Japanese banks, Earnings management, Deferred taxes, Regulatory Capital, BIS Rules

JEL Classification: E50, G21, M41, M43, M44, M47

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Date posted: October 10, 2005 ; Last revised: September 21, 2008

Suggested Citation

Skinner, Douglas J., The Rise of Deferred Tax Assets in Japan: The Case of the Major Japanese Banks (August 1, 2005). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=813784

Contact Information

Douglas J. Skinner (Contact Author)
The University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

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