Lehman Shock and the Japanese Financial Markets

I have been visiting Tokyo this week. The U.S. financial turmoil that started last week following the failure of the Lehman Brothers is clearly felt here as well. The most direct impacts of the failure came from the bankruptcy filing of the Lehman Brothers Japan, which was a major player in the Japanese Government Bond […]

The Cure for the U.S. Financial System?

‘I don’t care if Monday’s black Tuesday, Wednesday – heart attack Thursday, never looking back It’s Friday, I’m in love‘ Goes a rock band The Cure’s 1992 hit “Friday I’m in Love.” Lots of love in the stock market on Friday after the Treasury announced a program to deal with the financial crisis comprehensively. Will […]

The Lehman Shock: An Interim Report

Many people say that we are in the worst financial crisis in a century. It is certainly bad and the worst in the U.S. at least since the Great Depression. We have seen, however, many other crises in other parts of the world. The current crisis in the U.S. involves some new financial products, and […]

Who Will Be Japan’s Next Prime Minister?

The Liberal Democratic Party (LDP) of Japan is in the middle of election for the party leader to replace Yasuo Fukuda.  This is important because the LDP leader is going to be the next Prime Minister.  Prime Minister is chosen by elections by members in each of two Houses: House of Representatives and House of […]

Rescues of Fannie Mae and Freddie Mac: Is the U.S. Making the Same Mistake as Japan Ten Years Ago?

Treasury is now intervening in Fannie Mae and Freddie Mac.  The stock markets welcomed the move at least for a day, but so far the intervention has not done much more than just making the implicit government guarantee on the government sponsored enterprises (GSEs) explicit.  It is important for the U.S. government to formulate a […]

Masaaki Shirakawa’s Modern Monetary Policy in Theory and Practice

I have read Modern Monetary Policy in Theory and Practice: Central Banking and Financial Markets by Masaaki Shirakawa, Governor of the Bank of Japan (BOJ).  The book was published in March this year (2008), right before Mr. Shirakawa was selected to be a Deputy Governor of the BOJ.  After a couple of candidates for Governor […]

Systemic Banking Problem: A Japanese Experience

I have been reading excellent analyses by Chris Whalen on potential systemic banking crisis. I missed the RGE Monitor Panel Discussion, but I enjoyed reading the report by Naked Capitalism. I find Whalen’s and others’ argument that a systemic banking crisis involving many U.S. banks is likely, starting with the failure of the Bank of […]

Central Bank as the “Market-Maker of the Last Resort”

In my blog last week titled “Jusen,” I described how the financial regulators in Japan delayed the process of cleaning up the housing loan companies (jusen) after the fall of land prices (early 1990s) and ended up worsening the problem. I appreciate the comments, which I find right on the mark and prompted me to […]

Jusen

The turmoil in the U.S. financial system since the last summer reminds me (and many others) of the problems in the Japanese financial system following the end of the land and stock prices boom in the late 1980s. The financial problem in Japan continued for more than a decade and Japanese economy experienced so-called “lost […]