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BIS Papers
No 6
The financial crisis in Japanduring the 1990s: how theBank of Japan respondedand the lessons learnt
Hiroshi NakasoMonetary and Economic Department
October 2001
 
 This volume, number 6 of the
BIS Papers 
series, was written by a member of the Monetary andEconomic Department at the BIS. The views expressed in
BIS Papers 
are those of the authors and donot necessarily reflect the views of the BIS or of the institutions represented.
 
Individual papers(or excerpts thereof) may be reproduced or translated with the authorisation of the authors concerned.Requests for copies of publications, or for additions/changes to the mailing list, should be sent to:Bank for International SettlementsInformation, Press & Library ServicesCH-4002 Basel, SwitzerlandE-mail:publications@bis.orgFax: (+41 61) 280 9100 and (+41 61) 280 8100This publication is available on the BIS website (www.bis.org). © 
Bank for International Settlements 2001. All rights reserved.
ISSN 1609-0381ISBN 92-9131-626-1
 
 
BIS Papers No 6
i
 
Table of contents
Introduction ..................................................................................................................................... 11. Policy responses of the financial authorities ........................................................................ 21.1 The early stage, 1991 to mid-1994 ............................................................................ 21.2 The beginning of the crisis, mid-1994 to 1996 ........................................................... 41.2.1 The failures of Tokyo Kyowa and Anzen ....................................................... 41.2.2 Limits of the collective contribution by the private sector .............................. 51.2.3 The jusen problem ......................................................................................... 61.2.4 Amendment to the Deposit Insurance Law in 1996 ...................................... 71.3 The financial crisis of 1997 ......................................................................................... 71.3.1 Bailout of Nippon Credit Bank ....................................................................... 71.3.2 The financial crisis of autumn 1997 ............................................................... 81.3.2.1 The failure of Sanyo Securities ...................................................... 81.3.2.2 The failure of Hokkaido Takushoku Bank ...................................... 91.3.2.3 The failure of Yamaichi Securities ................................................. 91.3.2.4 The market turmoil ......................................................................... 111.3.2.5 The introduction of public funds and the first capital injection ....... 111.4 The financial crisis of 1998 ......................................................................................... 121.4.1 The failure of Long Term Credit Bank of Japan ............................................ 121.4.2 Outline of the new laws ................................................................................. 131.5 Systematic management of the crisis, late 1998-2000 .............................................. 141.5.1 Nationalisation of Nippon Credit Bank (NCB) ............................................... 141.5.2 Capital injection into major banks in March 1999 ......................................... 151.5.3 More systematic approach ............................................................................ 162. Why has it taken so long? .................................................................................................... 172.1 A paradigm shift ......................................................................................................... 172.2 The central bank’s dilemma ....................................................................................... 172.3 Structural problems that allowed a delay in recognition of the seriousness of theNPLs problem ............................................................................................................. 18
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