Abstract

A former Deputy Governor of the Bank of Japan reveals the on-the-ground account of crisis averted. The "last line of defense" to contain the financial crisis was not solely the responsibility of the central bank. Private financial institutions, financial supervisory authorities, the Deposit Insurance Corporation, and the fiscal authorities, who hold the resources for public capital injections to address capital shortages, were also involved. In order to build a strong line of defense, all parties involved had to work together in unison. If a crack appears in the line of defense, the crisis will escalate in an instant.

This book is a record of the struggles of former Deputy Governor Nakaso of the Bank of Japan, who dealt with two major financial crises: the Japanese financial crisis of the 1990s and the international financial crisis of 2008, which included the collapse of Lehman Brothers. Approximately two-thirds of the author's professional life was spent dealing with the Japanese financial crisis of the 1990s and the Lehman Shock. No one other than Mr. Nakaso took the lead in responding to these two crises.

This book is divided into four parts. Part 1 deals with the Japanese financial crisis of the 1990s. Part 2 addresses the international financial crisis. Part 3 deals with the Bank of Japan and monetary policy in the aftermath of the international financial crisis. Part 4 summarizes the lessons learned from the financial crisis and the challenges for the future.

Author’s Information

He is the President of Daiwa Institute of Research and a specially appointed professor at the Center for Financial Education, Graduate School of Economics, University of Tokyo. Born in 1953, he graduated from the Faculty of Economics, University of Tokyo in 1978 and joined the Bank of Japan in the same year. He served as head of the Credit Systems Division in 1997, director of the Financial Markets Department in 2003, a member of the Bank of Japan's Executive Director Board in 2008, and chairman of the Market Committee of the Bank for International Settlements (BIS), before becoming deputy governor of the Bank of Japan in 2013 and assuming his current position in 2018.