Policy based finance : the experience of postwar Japan
Kozo Kato | Tsutomu Shibata | Koichiro Fukui | Aiichiro Mogi | Yuichiro Miwa | Yoshikaz Niwa | Nobuhiko Ichikawa | Masahiro Furuta
Policy-based finance has a mixed record worldwide. On the one hand, it has often not been successful either at raising the level of aggregate investment or at intermediating funds efficiency. On the other hand, the Japanese policy-based finance system is one of the most successful. In channeling funds to the private sector, the Fiscal Investment and Loan Program (FILP) and the Japan Development Bank (JDB) were instrumental in the high economic performance of Japan in the early postwar period. Excellent performance was predicated on three factors -- respect for the market economy, a close relationship between government policies and policy-finance, and the managerial autonomy and professionalism of JDB. Monitoring and organizational commitment were also effective and they ensured that loan losses occurred at a minimum. This report examines the activities of policy-based finance in post WWII Japan. It focuses primarily on the activities of the JDB, which, as the primary institution in charge of industrial finance, played a large role in bringing about high economic growth. The report examines primarily the period from the end of WWII in 1945 to the mid-1960s, when Japan became an advanced industrialized country. Events after that time are discussed as necessary.
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