Explaining Cosmetic Compliance with International Regulatory Regimes : The Implementation of the Basle Accord in Japan, 1998-2003

The contemporary debate on compliance with international regulatory regimes centres around three competing approaches to the issue of non-compliance: the enforcement approach, the management approach and market-based approach. However, the analysis of domestic political causes of non-compliance is still in its early stage. In addition, a good deal of research from all three perspectives limits its analytic focus to formal compliance with explicit rules of regimes, and, as a result, non-compliance in a broader sense and the effectiveness of the compliance strategies in addressing such non-compliance are still vastly under-explored. This article attempts to fill some of these important gaps in the literature by addressing compliance in Japan with the 1988 Basle Capital Accord, which has been a keystone of financial regulatory regimes, in the period 1998-2003. This study demonstrates that compliance strategies relying on external pressures are not an effective means of restraining cosmetic compliance, although they may induce formal compliance. Comprehensive compliance fundamentally relies on the willingness and capacity of national authorities. Also, this research identifies a salient channel through which domestic opposition to compliance with an international regulatory regime can be magnified: the diffusion of compliance costs from the regulatory targets to non-target sectors which are politically important groups