In this book Takeo Hoshi and Anil Kashyap examine the history of the Japanese financial system, from its nineteenth-century beginnings through the collapse of the 1990s that concluded with sweeping reforms. Combining financial theory with new data and original case studies, they show why the Japanese financial system developed as it did and how its history affects its ongoing evolution. The authors describe four major periods within Japan's financial history and speculate on the fifth, into which Japan is now moving. Throughout, they focus on four questions: How do households hold their savings? How is business financing provided? What range of services do banks provide? And what is the nature and extent of bank involvement in the management of firms? The answers provide a framework for analyzing the history of the past 150 years, as well as implications of the just-completed reforms known as the "Japanese Big Bang." Table of Contents Foreword by Stanley Fischer vii Acknowledgments xi List of Figures xiii List of Tables xv List of Boxes xix 1 Introduction 1 2 Creation of a Modern System 15 3 Wartime Transformation 51 4 The Keiretsu Era 91 5 Bank Interventions 145 6 Benefits and Costs of Keiretsu Financing 185 7 Transformation through Deregulation 219 8 The 1990s: Crisis and Big Bang 267 9 The Future 305 Bibliography 329 Author Index 347 Subject Index 351