1998 Reports

The Japanese Big Bang as a Unilateral Action

Hamada, Koichi

Japan followed the British example of the "Big Bang" in April 1998. This move towards "Big Bang" is a unilateral action without requiring any conditions for the policy measures of other countries. This move has many economic grounds. The Japanese financial system has had incentive problems. Financial agents were looking at, or watching, the signals of policy makers and supervising administrative authorities rather than watching the signals of the markets. This created prolonged financial difficulties during the 1990s. The "Big Bang" is an attempt to liberalize the Japanese market towards the external world and, thereby, deregulate the internal financial market. Needless to say, political resistance against the process exists by various interest groups. If the "Big Bang" question overcomes the resistance, however, it may work as an effective means of modernizing and revitalizing the Japanese financial system by restoring proper incentive mechanisms.