Bank of Tokyo-Mitsubishi, Ltd.

Japanese bank shares plummeted on Tokyo's Nekkei stock change in January 1997 (Sapsford & Steiner, 1997, pp. A1, A8). The share drop exposed several underlying problems faced by Japan's major banking institutions. This research examines one of these problem areas in relation to the Bank of Tokyo-Mitsubishi, Ltd. The Bank of Tokyo-Mitsubishi, Ltd. is the successor institution to the merger of the Bank of Tokyo and Mitsubishi Bank that was effected in 1996 (Sender, 1996, p. 84). The problem area examined in this research is that the major Japanese banks are relatively inefficient in ordinary lending and investment functions. The problem area is analyzed in the discussion that follows using the Bank of Tokyo-Mitsubishi, Ltd. as the focus institution.

Return on capital at major Japanese banks, including the Bank of Tokyo-Mitsubishi, Ltd., approximates only one-third of the level of return earned by major North American banks that operate globally (Sapsford & Steiner, 1997, p. A1). Further, poor performance within Japan has caused Japan's larger banks to curtail their lending activity in foreign markets where they must maintain a growing presence to retain a competitive position globally (Sapsford & Steiner, 1997, p. A8). Within the Japanese market, bank lending activity has tended to be somewhat non competitive because of the close and long-term associations between banks and borrowers. As a result, banks were able to charge higher rates and demand other concessions from

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