Satoshi Koibuchi

Japan’s financial regulatory responses to the global financial crisis

Purpose - – This paper aims to understand Japan’s financial regulatory responses after the global financial crisis and recession. Japan’s post-crisis reactions show two seemingly opposing trends: collaboration with international organizations to strengthen the regulation to maintain financial stability, and regulatory forbearance for the banks with troubled small and medium enterprise [SME] borrowers. The paper evaluates the responses by the Japanese financial regulators in five areas (Basel III, stress tests, over-the-counter [OTC] derivatives regulation, recovery and resolution planning and banking policy for SME lending) and concludes that the effectiveness of the new regulations for financial stability critically depends on the willingness of the regulators to use the new tools. Design/methodology/approach - – This report evaluates the post-crisis responses by the Japanese financial authorities in five dimensions (Basel III, stress tests, OTC derivatives regulations, recovery and resolution planning and bank supervision). Findings - – The effectiveness of the new regulations for financial stability critically depends on the willingness of the regulators to use the new tools. Originality/value - – The paper is the first attempt to evaluate the financial regulatory trends in Japan after the global financial crisis.

Currency Invoicing Decision: New Evidence from a Questionnaire Survey of Japanese Export Firms

There have been only a few studies that empirically examine the firms decision on price setting or currency invoicing in international trade. This paper is the first study that conducts the questionnaire survey with all manufacturing firms listed in Tokyo Stock Exchange concerning the choice of invoicing currency at a firm level. Questionnaires were sent out to 920 Japanese firms in September 2009 and 227 firms responded. We present the new firm-level evidence on the choice of invoicing currency by destination and by type of trading partner, and also the share of invoicing currency of Japanese production subsidiaries in Asia. By conducting cross-section analysis, we found the following evidences: (1) highly differentiated goods and/or strong competitiveness of the products promote Japanese yen invoicing in exports to all countries, (2) larger share of intra-firm trade in exports promotes importers currency invoicing in exports to advanced countries, and (3) the production-sales networks of Japanese firms whose Asian production subsidiaries export their final products to other countries/region promote US dollar invoicing in exports to Asian countries. JEL No. F23, F31, F33

Changes in Corporate Restructuring Processes in Japan, 1981-2007

We analyze a large database collected from newspaper articles that report on major episodes of corporate restructuring in Japan between 1981 and 2007. By linking this database with financial data on public firms, we identify changes in the likelihood that a distressed undergoes restructuring, as well as in some measures adopted during restructuring. We find that the way distressed Japanese firms are restructured has changed during this period. The likelihood that a large distressed firm with high levels of debt undergoes restructuring has declined. Those firms that undergo restructuring continue to adopt more aggressive measures in terms of layoffs and cutbacks than other distressed firms, suggesting that “restructuring”, when it happens, involves real adjustments. Banks continue to be important for firms with a clearly identified main bank, and the main bank is more likely to push for more drastic reductions in debt and bank loans than other entities leading a restructuring event. Hoshi and Schaede: School of International Relations and Pacific Studies, University of California, San Diego, NBER, and TCER. e-mails: thoshi@ucsd.edu, uschaede@ucsd.edu; Koibuchi: Faculty of Commerce and Economics, Chiba University of Commerce (CUC), Japan, e-mail: koibuchi@cuc.ac.jp. We received helpful comments from Noriyuki Yanagawa and participants of the ESRI conference in New York in March 2008. We thank Emi Fukuda, Kanako Hotta, Masafumi Iino, Akifumi Irie, Yuichiro Kawai, Yoshikazu Kuki, Kuni Nemoto, Masashi Osakada, Mary Shiratori, Christopher Syling, Kunio Takeda, and Koki Yoshida for research assistance.

Managing Currency Risk

This book demonstrates how exporters’ decisions regarding choice of invoice currency can be influenced by many factors including firm size, product competitiveness, intra/inter-firm trades, and the geography of export destination. The aim is to enhance our understanding of exporters’ behavior in terms of managing currency risk. It contains detailed research and insightful data focusing on Japanese exporters and shows how they face an important trade-off in choosing the invoice currency. If exports are invoiced in yen, then exchange rate fluctuations will pass through to retail prices ultimately affecting sales volumes. However, if they choose to invoice in the importer’s currency, then sales volumes are largely unchanged.

Comment Paper to Chapters “The EU’s Approach to Improving Financial Regulation” and “Asia’s Approach to Improve Financial Regulation”

Both papers review the current status of financial supervision in the region and argue how to improve financial regulation via regional cooperation.