The Cost of Capital in Japan and Semantics of the Bubble

Abstract

One issue which has arisen from time to time in this study is that of the relative cost of capital in Japan. A very lengthy debate exists as to whether the cost of capital in Japan is or has been lower than in other countries. The traditional Japanologists have simply taken it for granted that government policy was aimed at achieving low interest rates and cheap cost of capital during the high growth period. More important than this, the typical Japanologist view is that such policies were successful in attaining their goals. Somewhat interestingly, however, is the fact that most of these Japanologists argue that the cost of capital was low in Japan during the high growth period, but then assign the role of capital a subordinate role in their explanations for rapid growth (Johnson, 1982). Typically, some vaguely defined industrial policy and exotic blend of cultural factors are argued to have been of central importance by such ‘scholars’.