Financial liberalization, speculative bubble and banking crisis in Japan

Vol. 17 No. 1 (1997)

Jan-Mar / 1997
Published January 1, 1997
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Levi, Maria Luiza. 1997. “Financial Liberalization, Speculative Bubble and Banking Crisis in Japan”. Brazilian Journal of Political Economy 17 (1):43-64.

Financial liberalization, speculative bubble and banking crisis in Japan

Maria Luiza Levi
Assessora econômica da Secretaria da Fazenda do Estado de São Paulo, São Paulo/SP, Brasil.
Brazilian Journal of Political Economy, Vol. 17 No. 1 (1997), Jan-Mar / 1997, Pages 43-64


This paper examines the institutional environment of the Japanese financial system
and its role in the asset price bubble and financial crisis. The deregulation process of the
80s eliminated various rules that had previously been used by the government to monitor
the economic growth through monetary and credit policies. Banks turned to more risky operations
and, under a period of low interest rates, contributed to drive liquidity to speculative
sectors, which were at the center of the asset bubble. The change in monetary policy put
an end to the rise of asset prices and resulted in default of many borrowers. Since 1991 the
Japanese banking sector is trying to absorb the huge volume of non-performing loans of its
portfolio related to this process.

JEL Classification: F65; G18; G21.

Keywords: Bank crisis liberalization deregulation globalization