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9. The political economy of financial deregulation (not in the context of the Japanese crisis) is well analyzed in Calder, Kent, “Assault on the Bankers' Kingdom: Politics, Markets, and the Liberalization of Japanese Industrial Finance.” In Loriaux, Michael et al., eds., Capital Ungoverned: Liberalizing Finance in Interventionist State (Ithaca: Cornell University Press, 1997); Laurence, , Money Rules; Frances Rosenbluth, Financial Politics in Contemporary Japan (Ithaca: Cornell University Press, 1989); Goodman, John and Pauly, Louis, “The Obsolescence of Capital Controls? Economic Management in an Age of Global Markets,” World Politics 46, no. 1 (1993): 50–82; Pauly, Louis, Opening Financial Markets: Banking Politics on the Pacific Rim (Ithaca: Cornell University Press, 1988). Several scholars include an analysis of financial deregulation but downplay its explanatory power relative to other structural features. Amyx, , Japan's Financial Crisis ; Laurence, , Money Rules. Google Scholar

10. McKinnon, Ronald, The Order of Economic Liberalization (Baltimore: Johns Hopkins University Press, 1993).Google Scholar

11. Stiglitz, Joseph, Globalization and Its Discontents (New York: Norton, 2002); Haggard, Stephan, The Political Economy of the Asian Financial Crisis (Washington, D.C.: Institute for International Economics, 2000). See also works by Ha-Joon, Chang and Jomo, KS.Google Scholar

12. I am grateful to Stephan Haggard for this concept of bad equilibrium.Google Scholar

13. Japan's Ministry of Finance (handout of the Banking Bureau).Google Scholar

14. Ibid.Google Scholar

15. A major plan to reduce regional inequities by relocating industries to the interior and to the Sea of Japan side and to link together the entire nation by constructing 9,000 kilometers of Shinkansen and 10,000 kilometers of superhighways. The plan's rationale was to spread more equally the fruits of high growth. See Nakamura, , The Postwar Japanese Economy, p. 203.Google Scholar

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17. International Monetary Fund, Occasional Paper No. 124, Washington, D.C., 1995, p. 64.Google Scholar

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19. First, the collapse in land prices and the ensuing recession led to the quasi-bankruptcy of many real estate companies and other recipients of bank loans. Second, the collapse in stock prices led to a huge reduction in bank reserves (which include a large amount of equity due to company shareholding) and in turn to the necessary lending reduction in order for banks to fulfill the 8 percent BIS asset-reserve adequacy ratio. Third, the reduction of interest rates to 0.5 percent by 1995 and 0.25 percent by 1998 made it nearly impossible for banks to earn a high enough margin on loans. McKinnon and Ohno, “The Exchange Rate Origins of Japan's Economic Slump in the 1990's.” Google Scholar

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26. Ibid., p. 216.Google Scholar

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31. “How could the world's most acclaimed economic miracle have stumbled so badly? The root of the problem is that Japan is still mired in the structures, policies, and mental habits that prevailed in the 1950s and 1960s. What we have come to think as the ‘Japanese economic system’ was a marvelous system to help a backward Japan catch up with the West. But it turned into a terrible system once Japan had in fact caught up'. The Japanese ‘economic model’ that we see today is not, as some have suggested, a different kind of capitalism. It is rather a holdover from an earlier stage of capitalism. It is the spectacle of a country vainly trying to carry into maturity economic patterns better suited to its adolescence.” Quoted in Katz, , Japan: The System That Soured, pp. 4–6.Google Scholar

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35. International Monetary Fund, “The Japanese Banking of the 1990s: Sources and Lessons,” 2000, p. 1.Google Scholar

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39. Ibid., p. 18.Google Scholar

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41. Cargill, Hutchison, and Takatoshi, , The Political Economy of Japanese Monetary Policy, p. 104.Google Scholar

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50. Ibid., p. 400.Google Scholar

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68. On the review of the literature on sequencing and an application to financial liberalization in East Asia, see the excellent paper by Walter, Andrew, “Financial Liberalization and Prudential Regulation in East Asia: Still Perverse?” Institute of Defence and Strategic Studies Working Paper (Singapore: Institute of Defence and Strategic Studies, 2002).Google Scholar

69. Rosenbluth, , Financial Politics in Contemporary Japan, pp. 14–15.Google Scholar

70. See an excellent analysis in Frankel, Jeffry, The Yen/Dollar Agreement: Liberalizing Japanese Capital Markets (Washington, D.C.: Institute for International Economics, 1984).Google Scholar

71. Calder, , “Assault on the Bankers' Kingdom.”Google Scholar

72. Ibid., pp. 17–18.Google Scholar

73. Ibid., pp. 19–20.Google Scholar

74. Ibid., p. 24.Google Scholar

75. Ibid., p. 25.Google Scholar

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86. Ibid., p. 131.Google Scholar