In this short note, I will explain the structure of Japan's financial regulation and
supervision and discuss by way of examples the structure's weaknesses and strengths. In
doing so, I pay particular attention to the role played by the Bank of Japan (BOJ). The
paper focuses mostly on the period since the late 1980s when Japan saw the formation
of land and stock price bubbles, their burst and serious negative effects on the financial
system and the economy. I argue that, despite a streamlined structure of financial
regulation, monetary authorities' response was not quite optimal and discuss possible
reasons for the sub-optimal behaviors. I also point out that there are significant
synergies between monetary policy and prudence policy at central banks, but that such
synergies are not fully exploited.
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