Financialization in Japan

Abstract

Since the 1980s, neoliberal economic policies have promoted financialization throughout the global economy. While Japan has not been entirely unaffected by this phenomenon, its financialization is peculiar. It is certain that big businesses have been accumulating excess money, rather than reinvesting it, but financial institutions have not grown in terms of financial assets. Moreover, Japan’s financial system remains, even today, a traditional bank-based system. It is a fact that foreign investors now hold more stock in large Japanese companies than was previously the case, and consequently, they have imposed the rules of shareholder capitalism. However, in the 2000s, large Japanese companies have offered only modest increments in dividend payouts. Meanwhile, the total remuneration of the directors of those companies has been declining. Since the financial crisis of 1997–1998, big businesses in Japan have cut wages to increase profits during periods of slow economic growth. However, financial institutions have neither the will nor the capability to use their reserves. Additionally, households in Japan have avoided the option of taking out home mortgages and credit to purchase consumer goods that would have made them a part of financialization as borrowers. These events have prevented Japan from realizing full-fledged financialization. Instead, the Japanese economy grew through an expansion of exports in the 2000s; since then, under Abenomics, the old export-led model has come to an end. This does not mean, however, that Japan’s model is a replication of the American model.