## Japanese Banks and the Asset Price "Bubble"

_IMF Working Papers, November 1, 1993_

## Source details

**Canonical URL:** [Japanese Banks and the Asset Price "Bubble"](https://www.imf.org/en/publications/wp/issues/2016/12/30/japanese-banks-and-the-asset-price-bubble-869)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/japanese-banks-and-the-asset-price-bubble-869/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/japanese-banks-and-the-asset-price-bubble-869/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/japanese-banks-and-the-asset-price-bubble-869/bundle-manifest.json)

## Bibliographic details
- Authors: Steven M. Fries
- Published: November 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451954302.001

---

### Summary findings
- With the recent collapse of the asset price “bubble,” Japanese banks encountered significant pressure from both a sharp decline in the value of equity holdings and a marked increase in bad loans.
- In August 1992, the Government initiated measures that stabilized equity prices and assisted banks in managing their nonperforming loans.
- Major banks disclosed that 4.6 percent of their total loans were nonperforming at the end of FY 1992.
- A mechanical estimate of all banks’ nonperforming and restructured loans is 6-7 percent of their total loans--a serious yet manageable problem.
- The main policy implications are to ensure the reasonably prompt resolution of the bad loan problem and to enhance market discipline to prevent its recurrence.

### Policy implications and recommendations
- Ensure the reasonably prompt resolution of the bad loan problem.
- Enhance market discipline to prevent recurrence of asset price "bubble" related banking problems.
- Government intervention (as executed in August 1992) can stabilize equity prices and assist banks in managing nonperforming loans.

---


_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/japanese-banks-and-the-asset-price-bubble-869_