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The Political Economy of Japanese Financial Markets: Myths Versus Reality (International Political Economy)

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This a comprehensive book. However, it misses on the most critical part of the Japanese economy which impinges on its functioning. The presence of business houses with banks as one of the important constituents resulted in funds being provided at very low cost. As a result some of the marginal investment projects also qualified as a viable project. It is a simple premise : the cost of capital being low, say about three percent, the discounted value of future earning rises and this leads to their acceptance. During the upswing of the economies it is good but during the down-swing it loans going bad and to the list of non-performing-banking assets. This situation is further confounded due to inter-investment of funds. It is extremely difficult to track down the performance of the firms that have been financed. This is precisely what has happenedduring the financial crisis in Asia. The process of monitoring has been rendered difficult. Any efficient system of monitoring would have given warning signals. The other inflexibilites of the Japenese system further aggravated the problem - life long employment, seniority based promotions, created some degree of demotivation among employees. The second generation of the Japanese executives are more anxious to have promotions. They have alternative employment opportunities available to them. This has been rendered possible because of emergence of internet as a mode of recruitment used by potential employers at the global level. In recent times some Japanese firms have given up some of these rigidities. Some well known firms have retrenched workers. Mazda has a non-Japanese CEO, has promoted a 41 years old on the board of directors. The above points do not undermine contribution of the book in providing enormous information under one title.