The Ministry of Finance and Bank of Japan

The Ministry of Finance and Bank of Japan

Thus Japan's financial world was nicely segmented by law and it was overseen by a protective Ministry of Finance (MoF). The MoF is probably Japan's most powerful ministry because it has the power to draw up the nation's budget, supervise the banking, insurance and securities industries and to collect taxes. This arrangement is different from the United States where Congress generally decides the budget, the Securities and Exchange Commission watches the markets and the Internal Revenue Service collects the taxes.

In Japan the various bureaus in the MoF were staffed with officials who spent more time protecting their appointed industry than protecting individual investors. This is in accordance with a Japanese custom known as amakudari (literally "descent from heaven"). Under amakudari, underpaid and overworked government bureaucrats are able to retire at an early age to a cushy job in the sector they once regulated. Because no bureaucrat wants to retire to a firm in the throes of hot competition, officials spend most of their time protecting the turf of their assignment from encroachment by other financial sectors.

Along with the MoF, another big governmental entity in Japan's financial world is the Bank of Japan (BoJ). The BoJ was set up in 1949 by the occupation forces in a way that corresponds with the United State's federal reserve system. The BoJ's main purposes are to provide currency, act as a bank for financial institutions, act as a bank for the government and to control the money supply.

The BoJ is a profitable corporation - it routinely reports the highest net profits of any Japanese corporation - whose governor and vice-governor are selected by the Japanese cabinet. Although the BoJ has a fair degree of independence, the finance ministry still has much sway with the BoJ because the ministry appoints many of the managing directors, auditors and advisors of the BoJ.

Thus within thirty years after the end of the war the finance ministry was like an all-powerful shogun who was overseeing and protecting carefully partitioned fiefdoms. However, this fairy-tale world would soon be thrown into civil war. Seditious foreigners would receive some of the blame for the coming chaos, but Japanese corporations and the government itself would be the cause of the coming deregulation.