Comparison between the US and Japanese banking systems

Résumé du document

The Japanese and the Americans have different perceptions of time. This difference exists as part of their culture and the values they advocate. The cultural, political and historical background consequently leads to two different banking forms: the bank-based and the market-based systems. Until the 1990s, many observers acknowledged that the "patient capital vision" that implied a long-term relationship with the banks was greatly a part of the Japanese success. However, the results-oriented American behavior proved its efficiency during the 1990s while Japan was undergoing a severe financial crisis. However both systems have their own advantages and there is no "one best way".

Extraits

[...] (2003) How to Avoid the P/E Trap, Reader and Tanabe (1998), Academic db, How does the emergence of the religious sects reflect the spirit of the Roe, M. (1994). Strong Managers, Weak Owners: The Political Roots of Corporate Finance, Princeton: Princeton University Press. Shleifer, A. and L. Summers (1988). "Breach of Trust in Hostile Takeovers," in A. Auerbach, ed., Corporate Takeovers: Causes and Consequences, Chicago: University of Chicago Press, 33-56. Ueda, Kazuo Institutional and Regulatory Frameworks for the Main Bank System. In The Japanese Main Bank System. Its Relevance for Developing and Transforming Economies, edited by M. Aoki and H. Patrick. [...]

[...] The funds came mainly from the Yochu or the Postal Savings System. This system was unique and was able to raise large amounts of funds because of its extensive branch system. During the reconstruction, Japanese firms needed long-term funds to insure their growth. The government adopted the Law of Long-Term Credit Banks in 1952. The firms were consequently able to raise funds by issuing long-term debentures instead of short-term deposits. This law illustrates the birth of the capital patient principle. [...]

[...] The roots of the US and Japanese perceptions of time 3 B. Polychronic versus Monochronic systems 4 C Which effects can implied these differences ? 4 II How the political and historic backgrounds influenced US and Japanese economies ? 4 US evolution 5 Japanese evolution 5 III- Results-oriented versus Patient capital 7 Results orientation 7 Japanese patient capital 7 IV- How could evolve both systems ? 8 The Big Bang reforms 8 The required equilibrium 8 Bibliography 9 Appendix A 11 Appendix B 11 Appendix C 12 Introduction The cultural, political and historical backgrounds are usually under- estimated to explain the economy of a given country. [...]

[...] For instance, the Appendix B illustrates a convergence between the American and the Japanese debt-to-equity ratios. Between 1980 and 1992, the Japanese ratio decrease from 5.16 to 3.93 23.84 while the US ratio increased from 0.42 to Furthermore, firms that announce an increase in leverage usually their firm value by 4.51 percent in a single day (Masulis 1980). This phenomenon added with the tendency for leveraged buyout show that both systems can be complementary. While deregulation, strong corporate governance and weaker administrative governance seemed to be needed for a wealthier financial system, the Japanese have to take into account their specificities and their own values. [...]

[...] To explain the differences between the American and the Japanese banking system, it is crucial to understand how they perceive time. It is indeed a false belief to think that time is absolute. The roots of the US and Japanese perceptions of time Before the feudalism period, the Western world used to consider time as repetitive. Then, because of the industrial age, time began to be seen as linear. The invention of the clock introduced the uniform time system. Time was not anymore perceived as a personal experience but as a abstract measure system and scientist rationalization took advantage on spirituality vision. [...]