The Transmission of Japanese Financial Shocks: Evidence from International Bank Claims on East Asian Economies

Abstract

Since Japanese banks have been the major creditors in Asia, Japan has been a notable source of regional macroeconomic fluctuations. This study explores the patterns of Japanese bank claims in East Asian economies, focusing on the transmission effects of Japanese financial shock via international bank claims. The author finds that international lending by Japanese banks differed substantially from that of other major lenders. The study also suggests that the banking shocks captured by the Japanese stock market decline and nonperforming loans were transmitted throughout other East Asian economies via lending activity by Japanese banks. This association was found to be statistically significant.

Keywords:

• East Asia
• financial shock
• international bank lending
• Japanese banking crisis
• transmission effect