In Search of "Capital Crunch": Supply Factors Behind the Credit Slowdown in Japan

Author/Editor:

David Woo

Publication Date:

January 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The seeming failure of loose monetary policy to reactivate Japan’s economy has led some observers to suggest that the usual credit channels through which monetary policy affects the real economy are blocked, and this because of a pervasive shortage of bank capital that has induced a leftward shift in the supply of bank credit: the so called credit crunch hypothesis. This paper finds support for the hypothesis in the 1997 bank data—a year during which the landscape of the Japanese financial system was changed fundamentally—but finds no, or even contrary, evidence, for most of the 1990’s.

Series:

Working Paper No. 1999/003

Subject:

Bank credit Banking Capital adequacy requirements Credit Financial institutions Financial regulation and supervision Loans Money Nonperforming loans

English

Publication Date:

January 1, 1999

ISBN/ISSN:

9781451841886/1018-5941

Stock No:

WPIEA0031999

Pages:

28

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