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Japan Financial Institutions
For most of the postwar period, Japan's financial
institutions
operated in a severely regulated environment: most
interest rates
were controlled, the type of business these institutions
could
engage in was narrowly circumscribed, and few
international
transactions were possible. Beginning in the 1970s, these
controls
began to loosen, and financial institutions rapidly
expanded their
international activities. By the end of the 1980s, they
were major
international players.
The major international players were "city" banks (the
thirteen
largest banks in Japan, which operated nationwide
branches),
investment houses, and life insurance companies, which
invested
heavily in pension funds abroad in the 1980s
(see The Financial System
, ch. 4). In 1990 the five largest banks in the
world,
measured by total assets, were Japanese banks. These banks
opened
branches abroad, acquired existing foreign banks, and
became
engaged in new activities, such as underwriting Euro-yen
bond
issues. The investment houses also increased overseas
activities,
especially participating in the United States Treasury
bond market
(where as much as 25 to 30 percent of each new issue was
purchased
by Japanese investors in the late 1980s). The life
insurance
companies moved heavily into foreign investments as
deregulation
allowed them to do so and as their resources increased
through the
spread of fully funded pension funds.
As of March 1989, the five largest city banks in Japan
(in
order of total fund volume) were Dai-Ichi Kangyo Bank,
Sumitomo
Bank, Fuji Bank, Mitsubishi Bank, and Sanwa Bank. The four
largest
investment houses, which dominated the securities
business, were
Nomura, Daiwa, Nikko, and Yamaichi.
Besides these private institutions, there are a number
of
government-owned financial institutions. Of these, the
Japan
Export-Import Bank (Exim Bank) is the only one with an
international focus. The Exim Bank provides financing for
trade
between Japan and developing countries, performing the
function of
export-import banks run by governments in other countries
(including the United States), although its participation
is
possibly greater.
As Japan became a more important international
financial power,
Tokyo became a world financial center. In April 1989, the
average
daily volume of transactions in the Tokyo foreign exchange
market
was US$115 billion, not far behind the US$129 billion in
New York.
The Tokyo Securities and Stock Exchange also rivaled the
New York
Stock Exchange in daily volume, overtaking New York in
1988 to
become the world's largest stock exchange in terms of the
combined
market value of outstanding shares and capitalization.
Data as of January 1994
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