Banking regulation and supervision in Japan: Some issues and concerns

Despite significant changes to the governing institutional framework and to operational procedures, a number of serious doubts remain concerning the cost‐effectiveness of banking regulation and supervision in Japan. This paper duly highlights these lingering doubts focusing, in particular, on failure resolution policy and the authorities’ handling of the banks’ bad debt problems. The paper concludes by making suggestions as to how the Japanese authorities might improve the situation, to the mutual benefit of Japan and the world economy. (This paper represents a revised and updated version of a presentation given at the London Financial Regulation Group’s Conference on ‘The Institutional Organisation of Banking Supervision’ held at the London School of Economics on 7‐8th December, 2001.)