JAPANESE DEREGULATION

JAPAN'S "BIG BANG" FINANCIAL DEREGULATION: IMPLICATIONS FOR REGULATORY AND SUPERVISORY POLICY Former Prime Minister Ryutaro Hashimoto announced that government would undertake an extensive deregulation of Japan's financial system by 2001— a proposal likened by senior officials to the "Big Bang" financial deregulation in the United Kingdom more than a decade ago. The exact nature of these reforms, the timetable for implementation, and indeed whether the reforms will be as sweeping as promised, is still uncertain. The …

…in the financial disruptions of the 1980s and in the problems that the 1990s inherited from the boom-and-bust period. This view is rooted in the traditional argument that unregulated and competitive banking is inherently unstable in the absence of government supervision. In the context of liberalization in the 1980s, the removal of binding portfolio constraints permitted banks and other depositories to adopt more riskier investment and loan portfolios, including the adoption of high loan-to-value ratios.