Analysis of the Efficiency and Profitability of the Japanese Banking System

Author/Editor:

Elena Loukoianova

Publication Date:

March 1, 2008

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 paper analyzes the efficiency and profitability of Japanese banks from 2000-06. It uses a non-parametric approach, the data envelopment analysis (DEA) to analyze banks' cost and revenue efficiency. The results show that the performance of Japanese banks has steadily improved since 2001, but there are significant differences within the banking sector, with regional banks being less cost and revenue efficient relative to both City and Trust banks. While Japanese bank profitability is low compared to that in other advanced countries, there is considerable potential for efficiency gains, particularly through increased cost-sharing arrangements among regional banks, consolidation of regional banks with major or other regional banks, and the creation of bank consortia to pool resources for asset and risk management.

Series:

Working Paper No. 2008/063

Subject:

Bank soundness Banking Commercial banks Personal income Total factor productivity

Frequency:

Monthly

English

Publication Date:

March 1, 2008

ISBN/ISSN:

9781451869255/1018-5941

Stock No:

WPIEA2008063

Pages:

34

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