The Electoral Foundations of Japan's Banking Regulation |
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| Authors: | Frances Rosenbluth Michael F. Thies |
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| Affiliation: | teaches Japanese politics and comparative political economy at Yale. She is the author of Financial Politics in Contemporary Japan, Japan's Political Marketplace;, and The Politics of Oligarchy (the latter two with Mark Ramseyer). teaches Japanese politics and comparative politics at UCLA. He writes widely on Japanese elections, coalition politics, and the politics of regulation. His current book project examines the causes of variations in legislative organization in Japan and other advanced democracies. |
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| 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. |
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