Chapter

Did the Japanese Stock Market Appropriately Price the Takenaka Financial Reform?

Masaya Sakuragawa and Yoshitsugu Watanabe

in Financial Sector Development in the Pacific Rim

Published by University of Chicago Press

Published in print April 2009 | ISBN: 9780226386843
Published online February 2013 | e-ISBN: 9780226386867 | DOI: http://dx.doi.org/10.7208/chicago/9780226386867.003.0023
Did the Japanese Stock Market Appropriately Price the Takenaka Financial Reform?

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This chapter examines how the stock market evaluated Japanese financial reform (the “Takenaka Plan”) using a conventional event study methodology. It focuses on a number of financial events that occurred in 2002 and 2003, including the announcement of the Takenaka Plan; the release of the work schedule implementing the financial reforms; the package of monetary policies initiated by the new governor of Bank of Japan; and the failures of Resona Bank and Ashikaga Bank. The results suggest that market participants came to believe only gradually in the government's intentions to reform bank governance. However, the credibility of the reforms drastically increased in 2003. Thus, at least some of the widely held skeptical attitudes toward economic reform seem unwarranted, at least so far as the financial markets are concerned.

Keywords: Japanese financial reform; Takenaka Plan; financial regulation; monetary policy; Bank of Japan; Resona Bank; Ashikaga Bank; bank fgovernance

Chapter.  13334 words.  Illustrated.

Subjects: Business and Management

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