Hastings International and Comparative Law Review


In response to both domestic and international pressure, the Japanese government began a series of reforms designed to deregulate their financial market in 1998. The reform plan is modeled after the British and U.S. deregulation measures often-termed "Big Bang" reforms. The essence of Japan's Big Bang is the end of highly segmented financial markets in favor of a single market where domestic and foreign banks, securities houses, insurance companies and other financial institutions will be free to compete in each other's business specialties.

The recent amendments to the Foreign Exchange and Foreign Trade Law are an example of Japanese Big Bang legislation. The changes completely liberalize all foreign exchange control regulations and should help to reduce the cost of overseas business and maintain international competitiveness. However, the likely effect of the combined changes in the foreign exchange laws without corresponding changes elsewhere may encourage Japanese investors to look to foreign financial markets for better opportunities. Whether those necessary changes will be made depends on whether Japan can overcome its structural and cultural barriers to reform.