Policymaking in Japan's financial markets

Abstract

This thesis explores the process of regulatory development and implementation in the Japanese financial markets during the 1970s. A set of eight hypotheses is used to examine the interrelationship between the component parts of the policymaking process and to comprehend the degree of immobilism inherent in it. These hypotheses focus on the roles of the LDP, the public service and the financial institutions in the policymaking process and the effect of international compared with domestic influences in determining policy outcomes. The thesis emphasises the need to define more carefully the character of 'consensus' and other modes of policymaking. Chapter 1 presents on institutional overview of the Japanese financial system. Chapters 2-4 examine case studies which focus on regulatory policy solely administered by the Ministry of Finance. These case studies explore the role of the LDP and the changing relationship between the publi c service and the finance industry in the development of the government bond market, the bureau level policymaking process which was evident in the formation of the Certificate of Deposits market and the conflict within the Ministry of Finance in regulat ory policymaking relating to trading in government bonds. Chapter 5, which examines the postal savings system, analyses the impact of strong LDP interest in the poli cymaking process, and the impact of inter-ministry disputation on policymaking. Chapters 6 and 7 compare the impact of international and domestic influences on policymaking in the context of the revision of foreign exchange law and the development o f the yen bond market. Chapter 8 attempts a different type ot analysis, exam~ning the general impacL of administrative, career and retirement patterns in the Ministry of Finance on policymaking. The detailed case studie s highlight the considerable variation in the policymaking process between the development of regulatory policy and implementation on the one hand, and the importance of conflict within and between ministries as an immobilising force in regulatory policymaking on the other. They show the role of the LDP to be directly related to its electoral interests and to vary greatly between issues. Overall its influence was more than what was casually apparent. The Ministry of Finance reacted to market pressures for regulatory change rather than develop its own long-range goals and policy, with the pressure to develop new policy coming from within the finance industry, which also acted to delay policy change. Finally, domestic influences generally dominated over international influences when the latter we re represented in policymaking.