Banking Systems:Case study of Japan

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History
Japan opened up to the western powers in the year 1959 (Tamaki 1995, p. 5). This was after it had been secluded for 230 years. The opening up had some implications on the ruling regime, the Tokugawa Shogunate. The shogunates held meetings and agreed to open up their ports in a bid to kick away the slogan “revere the empire, expel the barbarian.” This would however not go down well with the samurai extremists who were not open to the idea. The movement and their slogan lost control when the Satsuma and Choshu joined in the agreement considering they were the strongest domains. They gathered their well equipped army and attacked Shogunate in 1867.
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It is not a regulator but carries out inspections on premises to maintain a favourable financial system. Article 44, on site examination of the Bank of Japan act states that the bank can should carry out on site analysis of the financial firms built on the contract they have to appropriately conduct prudential policy actions for example emergency loaning services. Here, eligible collateral is not required as stated in Article 37 to 39. Securities institutions in Japan, Japanese firms and also security associates of foreign investment banks hold current accounts with the Bank of Japan. They also enjoy discount windows and are thus subject to on site examination by BOJ . The ministry of Finance (MOF) has been responsible for regulation until 1998 when FSA took over. In this year and in the middle of an economic crisis, the Shinshei Bank (Formerly Long term Credit bank of Japan) and Aozora Bank had to be de facto nationalised due to their economic importance. The body had found that were too large and thus vital for the economy for them to fail. The problem at this time was that Japan had at this time not developed a framework to handle this. The legislation body thus had to work promptly on these emergency regulations. By 2000, a clause-systematic risk exception clause-was passé by adding more explanations to the existing deposits laws. This was the perfect period for a complete overhaul of the system by strengthening the regulatory body to be able to
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