{
  "title": "Firm Investment and Balance-Sheet Problems in Japan",
  "publication": "IMF Working Papers, August 1, 1999",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251",
  "overlayPath": "/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/index.md",
  "summary": "This paper investigates whether balance-sheet conditions of firms and their main banks matter for firm investment behavior using dynamic corporate panel data in Japan for the period 1985-95.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Investigation period: 1985-95.\n- Data: dynamic corporate panel data in Japan.\n- Core question: whether balance-sheet conditions of firms and their main banks matter for firm investment behavior.\n- Key conclusion: evidence supports the existence of liquidity constraints and a credit crunch affecting small Japanese firms during this period."
    },
    {
      "heading": "Main findings",
      "content": "- Smaller non-bond issuing firms were facing liquidity constraints.\n- These smaller firms’ balance-sheet conditions (the debt asset ratios) affected their investment from the midst of the bubble era by influencing main banks’ lending to them.\n- The deterioration of these firms’ main banks’ balance-sheet conditions constrained these firms’ investment from about 1993.\n- These findings highlight the potential macroeconomic impact and importance of the credit channel of monetary policy.\n- The results support the case of a credit crunch facing small Japanese firms during this period."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- The credit channel of monetary policy can have significant macroeconomic effects through bank–firm balance-sheet interactions.\n- Deterioration in bank balance sheets can transmit to reduced lending and thereby constrain firm-level investment, particularly for smaller non-bond issuing firms.\n- Monitoring and addressing bank balance-sheet health is important to prevent or mitigate credit constraints on vulnerable firms.\n\n---\n\n Content in this bundle\n\n- Firm Investement and Balance-Sheet Problems in Japan - WP/99/111\n  - Firm Investement and Balance-Sheet Problems in Japan - WP/99/111 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Firm Investement and Balance-Sheet Problems in Japan - WP/99/111 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/bundle-manifest.json)",
    "Authors: Toshitaka Sekine",
    "Published: August 1, 1999",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451853452.001",
    "Investigation period: 1985-95.",
    "Data: dynamic corporate panel data in Japan.",
    "Core question: whether balance-sheet conditions of firms and their main banks matter for firm investment behavior.",
    "Key conclusion: evidence supports the existence of liquidity constraints and a credit crunch affecting small Japanese firms during this period.",
    "Smaller non-bond issuing firms were facing liquidity constraints.",
    "These smaller firms’ balance-sheet conditions (the debt asset ratios) affected their investment from the midst of the bubble era by influencing main banks’ lending to them.",
    "The deterioration of these firms’ main banks’ balance-sheet conditions constrained these firms’ investment from about 1993.",
    "These findings highlight the potential macroeconomic impact and importance of the credit channel of monetary policy.",
    "The results support the case of a credit crunch facing small Japanese firms during this period.",
    "The credit channel of monetary policy can have significant macroeconomic effects through bank–firm balance-sheet interactions.",
    "Deterioration in bank balance sheets can transmit to reduced lending and thereby constrain firm-level investment, particularly for smaller non-bond issuing firms.",
    "Monitoring and addressing bank balance-sheet health is important to prevent or mitigate credit constraints on vulnerable firms.",
    "**Firm Investement and Balance-Sheet Problems in Japan - WP/99/111**"
  ],
  "related": [
    {
      "title": "Firm Investement and Balance-Sheet Problems in Japan - WP/99/111",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/1999/_wp99111.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/1999/_wp99111.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/1999/_wp99111.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/index.md",
    "json": "/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/30/firm-investment-and-balance-sheet-problems-in-japan-3251/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T06:20:03.780Z"
}