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Changes in Japan's Financial Structure since the Later Half of the 1990s: the Supply of Risk Capital and Major Market Reforms

January 16, 2002
Naohiko Baba
Kenji Nishizaki
Yasunari Inamura
Tokiko Shimizu

The views expressed in the Review are those of the authors and do not necessarily represent the views of the Bank of Japan. Comments and questions as well as requests for hard copies should be addressed to Tokiko Shimizu, Manager, Financial Markets Department (

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Japan's financial structure has changed since the later half of the 1990s. The results of the Japanese "Big Bang" initiative have gradually manifested themselves in the domestic financial structure. The key factor here was the financial crisis of 1997- 1998. Throughout the 1990s, the household sector has shown a stronger preference for deposits, and the public sector has, in effect, assumed the risk of losses in channeling such funds into the corporate sector as risk capital. Meanwhile, efforts to improve the Japanese government securities (JGS) market over the past few years have effectively enhanced market liquidity. Japanese equity markets attracted risk capital from abroad as financial markets were deregulated. Nevertheless, it will be essential to further develop market channels for the provision of risk capital to support Japan's future economic growth, and to step up efforts to enhance the functioning of financial markets.