Bank of Tokyo-Mitsubishi, Ltd.

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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city bank loans made to large Japanese corporate enterprises—those with more than (100 million in capital—declined 50 percent of the total lending by these banks to 30 percent. Both short-term and long-term interest rates have declined in Japan as financial deregulation has proceeded (Morgan & Pain, 1996, p. 29). One of the first financial reforms was the introduction of secondary market, which resulted in the end of absolute government control of interest rates in Japan (Frankel & Morgan, 1992, p. 580). Japanese banks and securities firms were given formal authority for a market-rate funding mechanism for their bond purchases through the use of short-term repurchase agreements. Two provisions of the Foreign Exchange Law of 1980 were important to the integrating of Japanese domestic money markets with international markets (Frankel & Morgan, 1992, p. 581). These provisions of the law were the authorizations (1) for Japanese banks to borrow and lend foreign currencies freely (both at home and abroad), subject only to financial prudence guidelines, and (2) for Japanese corporate enterprises to finance themselves abroad through borrowing denominated in foreign currency. In the mid-1980s, reforms were introduced that gave Japa
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Approximate Pages = 7 (250 words per page)

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