The Japanese Banks in the Lasting Low-, Zero- and Negative-Interest Rate Environment

16 Pages Posted: 19 Feb 2021

See all articles by Taiki Murai

Taiki Murai

Leipzig University of Applied Sciences

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Date Written: December 14, 2020

Abstract

The bursting of the Japanese bubble economy in the early 1990s put the stage for a lasting lowzero-, and negative-interest rate environment, which fundamentally changed the business environment for the Japanese commercial banks. On the income side, with interest margins becoming increasingly depressed, net interest revenues declined, which forced the banks to expand revenues from fees and commissions. The banks had to cut costs by reducing the number of employees, closing branches and merging into larger banks. The gradual concentration process has most recently cumulated in the relaxation of the monopoly law. With the capital allocation function of banks being undermined, the Japanese economy has become zombified, suffering from anemic growth.

Keywords: Japan, Bank of Japan, monetary policy, banks, interest margin, financial repression, concentration, regional banks

JEL Classification: E50, E52, G21

Suggested Citation

Murai, Taiki and Schnabl, Gunther, The Japanese Banks in the Lasting Low-, Zero- and Negative-Interest Rate Environment (December 14, 2020). Available at SSRN: https://ssrn.com/abstract=3752271 or http://dx.doi.org/10.2139/ssrn.3752271

Taiki Murai

Leipzig University of Applied Sciences ( email )

Karl-Liebknecht-Straße 132
Leipzig, 04277
Germany

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

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