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Zombie Industry : Zombie Lending And Depressed Restructuring

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Finally, some other possible causes will be discussed in this section. First of all, Hoshi and Kashyap (2011) demonstrate that there are three primary causes of the long recession in 1990s. One of them is “Zombie lending and depressed restructuring”. The lax misleading supervisions of the banking system were extremely serious, but the Japanese government not takes any measure to stop lending money to zombie firms. Zombie firms are defined as firms are low on production and profit should exit the market but still continue the business by government’s support. They kept recruit labor supposed be work in regular firms lead to decreasing of production. When the assets price falls, most banks losses numerous loans and they could try to find new customers, but banks followed the policy by government and continued to support existing firms. Zombie firms are grown in number in 1990s after the “bubble economy”. The most important assumption is that zombie firms obstructed the growth of regular firms. If zombie firms did not rose, there would be more productive firms, more investment and employment. The second part is “Government Regulatory Restrictions”. One example is reported that Long-Term Credit Bank LTCB had lending policies with government that one of the conditions is LTCB must keep supporting small borrowers. Bank owners were forced to continue leading. Take 1970-2002 as research sample, it can be proved that severer regulated industries lower productively
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