Abstract
In this chapter, we indicate the limits of the present form of financial intermediation, and show how funds such as the Hometown Investment Trust (HIT) funds can point the way to the future. As Japan’s domestic financial system has transitioned from a multi-layered to a single-layered form, it has become clear that excessive reliance has been placed on indirect financing, which has reached its functional limit in financial intermediation. Despite over 10 years of discussions in various public–private forums, there has unfortunately been no significant change in the financial structure itself (Akai, Ann Soc Econ Stud Securities 45, 2007a). Nevertheless, the direct–indirect responses to the international financial crisis of 2008 have given rise to several fascinating public–private initiatives for supporting local economies.
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Notes
- 1.
Japan’s domestic banking system used to comprise three main types of institution: (1) government sponsored banks such as the Development Band of Japan, (2) long term credit banks and (3) city banks. This meant that Japan’s indirect finance used to be characterised by differing funding formats for the lenders themselves which enabled a variety of risk return/duration targets. This is what is meant by “multi-layered” here. During the course of the last 10 years, Japan’s financial system underwent reform, in the context of bad debt resolution and the general change of emphasis “from public to private.” As a result, today, our indirect financing system has become “single-layered,” i.e. dominated by city banks providing only relatively short funding/lending duration targets.
- 2.
Please see the chapter on“Establishment of a Financing Environment for Promoting Stable Private-Sector Urban Development.”
- 3.
There was an expectation that regional financial institutions, by investing in CMBSs backed by nonrecourse loans originated by multiple regional financial institutions, could diversify away earthquake and other area-bias risks in their nonrecourse loan portfolios.
References
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Akai, A. (2013). Supply of Risk Capital for Regional Development in Japan. In: Yoshino, N., Kaji, S. (eds) Hometown Investment Trust Funds. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54309-1_2
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DOI: https://doi.org/10.1007/978-4-431-54309-1_2
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