Financialization in Japan
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Financialization in Japan Shigeyuki Hattori1
© Japan Association for Evolutionary Economics 2020
Abstract Since the 1980s, neoliberal economic policies have promoted financialization throughout the global economy. While Japan has not been entirely unaffected by this phenomenon, its financialization is peculiar. It is certain that big businesses have been accumulating excess money, rather than reinvesting it, but financial institutions have not grown in terms of financial assets. Moreover, Japan’s financial system remains, even today, a traditional bank-based system. It is a fact that foreign investors now hold more stock in large Japanese companies than was previously the case, and consequently, they have imposed the rules of shareholder capitalism. However, in the 2000s, large Japanese companies have offered only modest increments in dividend payouts. Meanwhile, the total remuneration of the directors of those companies has been declining. Since the financial crisis of 1997–1998, big businesses in Japan have cut wages to increase profits during periods of slow economic growth. However, financial institutions have neither the will nor the capability to use their reserves. Additionally, households in Japan have avoided the option of taking out home mortgages and credit to purchase consumer goods that would have made them a part of financialization as borrowers. These events have prevented Japan from realizing full-fledged financialization. Instead, the Japanese economy grew through an expansion of exports in the 2000s; since then, under Abenomics, the old export-led model has come to an end. This does not mean, however, that Japan’s model is a replication of the American model. Keywords Financialization · Financialization in Japan · Neoliberalism · Financial system · Wage stagnation · Shareholder capitalism JEL Classification P10 · O54 · E14
* Shigeyuki Hattori [email protected] 1
Faculty of Commerce, Doshisha Univewrsity, Higashi‑Iru Karasuma‑Imadegawa Kamigyo‑ku, Kyoto 602‑8580, Japan
13
Vol.:(0123456789)
Evolutionary and Institutional Economics Review
1 Introduction Since the 1980s, neoliberal reforms have deregulated the labor and financial markets and cut welfare programs, resulting in the collapse of Keynesian economics, the welfare state, and managerial capitalism. Along with neoliberal reforms, financialization has occurred worldwide. According to Epstein (2005, p. 3), “financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operations of the domestic and international economies.” Some suggest that financialization is about the ascendancy of shareholder value, whereas others use the term in reference to the increased economic power of the rentier class or financial institutions. Still others argue that “financialization” refers to the growth of a market-based financial system. However, as Lapavitsas (2013, p. 799) argues, financialization also “represents a historically specific transformation of capita
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