Yoshiro Tsutsui

Why Did the Nikkei Crash? Expanding the Scope of Expectations Data Collection

Why did the Japanese stock market lose most of its value between 1989 and 1992? To help answer this and related questions, the authors have collected parallel time-series data from market participants in both Japan and the United States, 1989-94, on their expectations, attitudes, and theories. Substantial variability within countries through time in these data and, notably, dramatic differences across countries in expectations were found. While no unambiguous explanation of the Japanese crash emerges from the results, the authors do find a clear relation of the crash to changes in Japanese price expectations and speculative strategies. Copyright 1996 by MIT Press.

Investor behavior in the october 1987 stock market crash: The case of Japan*

In a questionnaire survey we asked Japanese institutional investors to recall what they thought and did during the worldwide stock market crash in October, 1987. The results confirm that the drop in U. S. stock prices was the primary factor on their minds, and other news stories in the United States dominated Japanese news stories. A comparison with an earlier survey of U. 5. institutional investors at the time of the crash (Shiller [1987])shows a remarkable similarity between Japanese and U. S. institutional investors in a number of attitudinal and behavioral dimensions. The results suggest that events in the United States were the proximate cause of the crash in Japan, but that the transmission mechanism of the crash was very similar in both countries.

Geographical segmentation in Japanese bank loan markets

Abstract This paper examines whether Japanese bank loan markets are segmented geographically. Studying regional banks and shinkin banks, we examine whether the demand and supply factors of each prefecture have an effect on the interest rates of that prefecture. The results suggest that the markets for regional banks are not segmented, but those of shinkin banks are. We also find that interest rates of adjacent prefectures do not differ very much, while those between distant prefectures do. We suggest that relaxation of regulation on geographical operations should promote competition and lower loan interest rates in rural Japan.

Threshold effect in international linkage of stock prices

Abstract This paper examines whether the international linkage of the stock price indexes found in previous studies is confirmed for the case where the stock index changes only slightly, utilizing the daily stock price index data from 1975 to 1995 for the US, UK, Germany, and Japan. Using dummy variables in the regressions, it is shown that small changes in the stock price index of any country do not affect the other countrys index. In contrast, large changes have a significant effect in most cases. Thus, there is a threshold effect in international linkage of stock prices. It is also shown that negative large changes have a clearer effect than positive ones.

Exchange rate and stock prices in Japan

This paper explores whether export intensity and net foreign position of the Japanese firms are carefully watched by investors and are properly reflected in the stock prices. By estimating a multifactor model including the TOPIX, the call rate, the exchange rate, and other variables representing the characteristics of individual firms, the market efficiency of the Japanese stock market has been examined. Novelty of this paper is in that the channels of the effect of exchange rate on stock prices are explicitly formulated and estimated directly, and in that the use of daily data enables knowledge to be gained on the market efficiency. The main results are as follows: (i) Japanese investors adequately consider the characteristics of the firms, such as the exporting behaviour and net foreign position. (ii) The market efficiency of the semistrong form has been improved throughout the period. (iii) Stock investors correctly evaluate firms’ foreign asset position and appropriately respond to the change of the exchange rate after 1992. In contrast, investors began to pay attention to exporting firms much earlier, that is, since 1985.

Implicit Contracts in the Japanese Bank Loan Market

The implicit contract theory explored by Azariadis [2] suggests that wage rigidity and underemployment are explained by the microeconomic optimizing behavior of each agent in the labor market. In this theory, the former phenomenon is interpreted as risk-sharing arrangements between firms and workers, whereas the latter may occur when workers have the opportunity to use leisure or unemployment insurance benefits.

Appropriate Lag Specification for Daily Responses of International Stock Markets

This paper explores the international linkage of stock prices, using daily stock price indices of the four major economies (USA, UK, Germany, and Japan) from June 1974 to December 1997. It is argued that previous studies have not estimated the structural equation system reflecting the sequential occurrence of market closing, which is crucial in investigating the characteristics of daily responses among international stock markets. By estimating the structural equation system, it is found that the most recent market has the strongest effect, except for the case of Japanese effects on the German market.

Managerial objectives in Japanese banking: a test of the expense preference hypothesis

Starting from the argument that profits are not paramount for Japanese banks, their managerial objectives are investigated by testing the expense preference hypothesis (EPH). The validity is questioned for previous studies which tested EPH as a joint hypothesis with the market structure performance hypothesis and/or the hypothesis that organizational structures have an effect on the presence of an expense preference because of their assumption of the linear utility function. The method adopted in most of these studies is shown to be invalid when the utility functions are not linear. A valid method is proposed which can test EPH as a single hypothesis. Empirical results show (1) the restriction of the linearity on the utility function is rejected, implying that the previous method is invalid and (2) neither profit maximization nor expense preference behaviour is found in Japanese banking.

Recent Competition in the Japanese Life Insurance Industry

This paper examines a change in the level of competition in the Japanese life insurance industry over the last 17 years. We estimate the first order condition for profit-maximizing insurance oligopolies to obtain the degree of non-competition and collusion. Estimation results suggest that: 1) not only stock companies, but also mutual companies maximize their own profits rather than pay out dividends to policyholders; 2) competition has become stronger since 1995; 3) revision of Insurance Industry Law and failures of insurance companies promoted the competition; and 4) the competition in the recent years is still more lax than the pre-war period.

Stock prices in Japan rise at night

Abstract Examining daily data of the Nikkei Average from 23 October 1986 to 20 January 1998, I find that although the mean of the rate of change during the trading hours (RT) is negative, the mean during non-trading hours (RNT) is significantly positive. I also find that (1) RT has a stable relationship with Japanese economic fundamentals while RNT does not, (2) RNT reflects US economic fundamentals, though weakly, and (3) if the previous trading hours reflected bearish trading, then the bearish sentiment is not taken over to opening time, as opposed to when the previous trading hours reflect a more bullish attitude. A possible cause of the positive RNT is optimism of Japanese investors, especially that of securities companies.