New Dimensions of Financial Liberalization in Japan
Differences Between The Financial Structures Of Japan And The United States Are Likely To Persist
By Masaharu Takenaka
Masaharu Takenaka is the director of the Economic Research Group, Institute for International Monetary Affairs. Since he graduated from Tokyo University, he held positions in the Bank of Tokyo-Mitsubishi UFJ, including chief representative of the Washington DC Representative Office, chief manager and senior economist of the Economic Research Group, and research officer and chief manager of the Currency Option Group of the Funds and Foreign Exchange Division. He is a member of Conference of Business Economists in the United States and was a board member of National Economists Club, a chapter of the National Association for Business Economics, in Washington, DC. He has published three books in Japan
This article contrasts the development of Japanese financial institutions over the past 50 years to that of the United States and compares the two countries’ household savings behavior. Although reform and liberalization is driving the Japanese financial sector to become more open and more sophisticated, there are powerful reasons for the Japanese system and Japanese asset-holding behavior to remain divergent from that of the United States. One major factor is that income and wealth in Japan are distributed much more evenly than in the United States. Since wealthy households are more sophisticated and better able to accommodate risk, the concentration of wealth in the United States means that, compared to Japan, there are more high income/high wealth households that are willing to take on risk from equity and bond holdings. In Japan, in contrast, there is a much heavier reliance on bank deposits. Even though financial institutions in the two countries are becoming more similar, the persistent differences in income distribution are likely to lead to persistent differences in asset holding and the composition of capital markets in the two countries.
