The Electoral Foundations of Japan's Banking Regulation

Posted: 2 Jul 2008

See all articles by Frances McCall Rosenbluth

Frances McCall Rosenbluth

Yale University - Department of Political Science

michael theise

affiliation not provided to SSRN

Date Written: June 9, 2000

Abstract

This article locates Japan's financial policies in the context of electoral incentives. The collapse of Japan's economic bubble in 1990 exposed the rot in the banking system, hidden for decades by a Liberal Democratic Party (LDP) government intent on maintaining favor with local support groups and protecting inefficient small banks. In a move wholly uncharacteristic of Japan's postwar politics, the LDP ultimately forced the banks to absorb huge losses rather than require taxpayers to bail out their mortgage-lending subsidiaries (jusen). We compare the government's subsequent bank bailout scheme with past government action and find that the government's objectives have shifted from boosting bank profits to ensuring their prudential regulation. We conclude on an optimistic note about the prospects for more public goods-oriented politics in Japan.

Suggested Citation

Rosenbluth, Frances McCall and theise, michael, The Electoral Foundations of Japan's Banking Regulation (June 9, 2000). Available at SSRN: https://ssrn.com/abstract=1154599

Frances McCall Rosenbluth (Contact Author)

Yale University - Department of Political Science ( email )

Box 208269
New Haven, DC 06520-8269
United States
203-432-5256 (Phone)

Michael Theise

affiliation not provided to SSRN

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