DISINTERMEDIATION AND BOND MARKET DEVELOPMENT IN JAPAN

A key problem for Japanese government policy relates to developing alternate forms of financing and investment. This study recommends that further development of Japan’s corporate bond market will provide an alternate investment vehicle, though improved access by foreign market participants including borrowers, investors and investment banks is a necessary precondition to the development of this market. Concerted efforts must be made to ease Japanese investors’ excessive aversion to risk, which limits the development of the extensive high-yield markets that exist in the U.S. and are now developing in Europe.