1992 Reports

Comparisons, contrasts and implications from financial development in Japan, Taiwan and Korea

Patrick, Hugh T.

The financial systems of Japan, Korea and Taiwan have not just grown, they have been profoundly transformed over time. The process has been evolutionary and incremental, driven by real economic growth and the attendant growth and change in demand for various types of financial services. To draw out some significant comparisons and contrasts and to reflect on their implications, this chapter first considers four aspects of the countries' systems. These are structure, the stress on the safety of the system, financial repression (the definitional result of below-market interest rate policies), and the ownership and control of commercial banks. This provides a context for analyzing the liberalization process, bank behavior, and the efficiency and effectiveness of finance, including the relationship of financial policies to the more comprehensive industrial policies of each country. The chapter concludes with an overall evaluation.