sanatullo
04-27-2001, 11:48 AM
Here some notes on why Japan could grow very fast. Those notes are derived as a summary from studies of several well known economists. Besides, make sure that summary doesn't belong to me. :)
1. The government did not tap the monetary system as a source of finance for itself. Quite the contrary, monetary seignorate was funneled back through the banking system to increase the flow of bank lending to the private sector.
2. Monetary stabilization with a constant domestic level, aided by a commitment to a stable nominal exchange rate, was the principal mode by which high real interest rates and high real financial growth were secured. The Japanese government was not put into a situation of having to permit high nominal interest rates in order offset high and variable domestic inflation.
3. Only after substantial financial deepening in the nonbank parts of the capital market (growth in primary securities trading, pension funds, and so on) did the authorities substantially loosen (or begin thinking about loosening) their restrictions on the actions of the commercial banks and other depository intermediaries whose deposits were implicitly or explicitly insured by the government.
4. The domestic banking system was never put in the situation of being the principla financial intermediary for significant amounts of net capital flows from abroad,- with the attendant dirict or indirect exchange risks. The limited foreign capital coming into Japan was in the form of direct investment, or more commonly, it took the form of company-to-company licencing agreements.
1. The government did not tap the monetary system as a source of finance for itself. Quite the contrary, monetary seignorate was funneled back through the banking system to increase the flow of bank lending to the private sector.
2. Monetary stabilization with a constant domestic level, aided by a commitment to a stable nominal exchange rate, was the principal mode by which high real interest rates and high real financial growth were secured. The Japanese government was not put into a situation of having to permit high nominal interest rates in order offset high and variable domestic inflation.
3. Only after substantial financial deepening in the nonbank parts of the capital market (growth in primary securities trading, pension funds, and so on) did the authorities substantially loosen (or begin thinking about loosening) their restrictions on the actions of the commercial banks and other depository intermediaries whose deposits were implicitly or explicitly insured by the government.
4. The domestic banking system was never put in the situation of being the principla financial intermediary for significant amounts of net capital flows from abroad,- with the attendant dirict or indirect exchange risks. The limited foreign capital coming into Japan was in the form of direct investment, or more commonly, it took the form of company-to-company licencing agreements.