Crisis and Reform in Japan’s Banking System (A)

Case Solution

Thierry Porte, Rawi Abdelal, Laura Alfaro, Jonathan Schlefer
Harvard Business School ()

In 1997, amid Japan’s continuing financial troubles, Prime Minister Ryutaro Hashimoto attempted to restructure the financial sector to make it more transparent and more competitive globally. He hoped that this attempt, dubbed the “Big Bang” after Britain’s financial restructuring a decade earlier, would be successful. But the financial problems, which had apparently subsided, seemed to be getting worse. So Hashimoto had to weigh the priorities. Should he focus on long-term restructuring, immediate financial rescue, or both? Could the overemphasis on long-term restructuring make big banks more prone to collapse? And what were the best economic and political strategies in these fields? As one of the major industrialized nations, Japan offers an analogy to the problems the United States faced in its 2008-2009 financial crisis.

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