Foreign banks in Japan: A study of a Japanese deregulation process

The process of deregulation of foreign banks in Japan has tended to be excruciatingly slow and piecemeal and to have been of minimal benefit to foreign banks. These characteristics are largely the result of organizational and political-bureaucratic factors inherent to the Japanese style of government, which reflects the influence of Japanese culture. The interplay of forces among the domestic stakeholders in their efforts to enhance and protect their relative competitive positions, as well as the responses of the regulatory authorities to protect clients and to ensure the desired orderly change of system as a whole, provide the key factors in explaining the timing and patterns of the implementation of regulatory changes. Although globalization and technological change appear to make the eventual liberalization of Japan's financial markets inevitable, the role of foreign banks in Japan will continue to be constrained for some time.