Disintermediation and Bond Market Development in Japan

Deakin University Working Paper No. 2002-02

45 Pages Posted: 22 Feb 2002

Date Written: February 14, 2002

Abstract

Analysis of flow of funds data provides evidence of gradual disintermediation in Japan's financial system, however the major channel for the allocation of domestic savings to productive assets remains bank intermediated lending. Consistent with earlier proposals by Schinasi and Smith (1998) and Rhee (2001), we argue that developing a viable domestic bond market is critical for the allocation of excess liquidity, and the on-going health of the Japanese economy. Specific recommendations examined include: (i) the removal of regulation which limits access to the underwriting and trading process; (ii) reducing the concentration of market power in the hands of banks; (iii) encouraging a broader investment choice by Japanese investors including households and institutional investors; (iii) improving infrastructure for the issuing and trading of securities; (iv) promoting the issuance of debt securities among potential domestic borrowers; (v) encouraging non-resident borrowers to tap the pool of Japan's excess domestic savings through domestic bond issues; and finally (vi) encouraging further internationalization of the yen, since there is a lack of yen funding requirements by foreign firms.

Keywords: Bond Markets, Financial System Reform, Japan

JEL Classification: E440, F340, G18

Suggested Citation

Batten, Jonathan A. and Szilagyi, Peter G., Disintermediation and Bond Market Development in Japan (February 14, 2002). Deakin University Working Paper No. 2002-02, Available at SSRN: https://ssrn.com/abstract=300619 or http://dx.doi.org/10.2139/ssrn.300619

Jonathan A. Batten (Contact Author)

RMIT University ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria
Australia

HOME PAGE: http://https://www.rmit.edu.au/contact/staff-contacts/academic-staff/b/batten-professor-jonathan

Peter G. Szilagyi

EDHEC Business School ( email )

24 Av. Gustave Delory
Roubaix, 59057
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
907
Abstract Views
4,274
Rank
54,475
PlumX Metrics