Arito Ono

Lending Pro-Cyclicality and Macro-Prudential Policy: Evidence from Japanese LTV Ratios

Using a unique micro dataset compiled from the real estate registry in Japan, we examine more than 400,000 loan-to-value (LTV) ratios for business loans to draw implications for the efficacy of caps on LTV ratios as a macro-prudential policy measure. We find that the LTV ratio exhibits counter-cyclicality through the business cycle. We also find that borrowers obtaining high-LTV loans performed no worse ex-post than those with lower LTV loans. Our findings imply that a fixed cap on LTV ratios might not only be ineffective in curbing loan volume in boom periods but also inhibit well-performing firms from borrowing.

Interfirm Relationships and Trade Credit in Japan: Evidence from Micro-Data

In this paper, we describe the current status of interfirm relationships in Japan with a special emphasis on the trade credit between firms. To do so, we first need to clarify what kind of firms in Japan we report on. In this section, we describe the source of our data, and how we chose the sample firms that are used for the analysis in the subsequent sections. We also explain the methodology that we use when we report our findings in the sections below.

Natural Disaster and Natural Selection

In this paper, we investigate whether natural selection works for firm exit after a massive natural disaster. By using a unique data set of more than 84,000 firms after the Tohoku Earthquake, we examined the impact of firm efficiency on firm bankruptcy both inside and outside of the earthquake-affected areas. We find that more efficient firms are less likely to go bankrupt both inside and outside of the affected areas, which indicates the existence of natural selection. However, we also find that firms located inside the earthquake-affected areas are less likely to go bankrupt than those located outside of the areas. We also applied the same methodology to the case of the Kobe Earthquake, and find qualitatively similar results.

A New Look at Bank-Firm Relationships and the Use of Collateral in Japan: Evidence from Teikoku Databank Data

Employing a unique micro dataset on the financial relationships between Japanese firms and their main banks and the use of collateral in their debt financing, this chapter provides a detailed account of the current landscape of business financing in Japan. The findings can be summarized as follows. First, main bank relationships are stable for most firms: less than 1 % of firm switch their main bank in any particular year, although more than 80 % of firms have established relationships with multiple banks. Second, main bank relationships are stronger in terms of deposit transactions than in terms of borrowing: the share of deposits with the main bank in the total amount of deposits is larger than the share of the amount borrowed from the main bank in the total amount of borrowing outstanding. Third, the most frequently pledged type of collateral is real estate property. And fourth, more than 30 % of real estate properties are used as collateral for multiple secured loans, suggesting that the use of junior liens is quite common in Japan.

Impact of Population Aging on Household Savings and Portfolio Choice in Japan

We examine the impact of population aging on Japanese financial markets, particularly whether households have begun to dissave and reduce their asset holdings of risky assets, such as stocks, as a result. Our main finding is that there is currently no significant decline in stock holdings and that this trend will continue in the near future. While there is little doubt that Japanese household savings have decreased of late, we should view the sharp decline observed in the early 2000s as a deviation from the long-run trend associated with a large income shock. The true trend of savings without a negative income shock in the early 2000s would have been declining more smoothly and moderately, so that any abrupt portfolio shift associated with negative shocks to household savings is unlikely. As found in our previous work, the average share of risky assets in Japanese household portfolios increases with age and barely decreases, even for those aged 60 years and over. The decline in household stock holding will be slower than it could have been with comparable aging in other countries. According to our micro data (Nikkei Radar), the main sources of increasing household wealth are the increasing wealth of the elderly and the increasing proportion of the wealthier elderly population over the period 2000–14. Household portfolio shares have slowly moved from bank deposits to stocks; a change mostly explained by the increase in the proportion of elderly households holding stocks. We also closely consider the effect of aging on the Japanese government bond (JGB) market in the new millennium. Household direct holdings of JGBs peaked around 2008–09. However, direct holdings of JGBs are very limited when compared with the total amount outstanding. Consequently, we expect that population aging will not exert a significant effect on the JGB market