This paper provides an overall view of the recent development of the Japanese financial system. The profound crisis of the 1990s indicates that financial deregulation has met obstacles created by the fundamental underlying structure of Japanese industrial capitalism. The movement toward a market-based Anglo-Saxon financial system, at arms-length from industry and the state, has lost its momentum. Crisis-resolution in the 1990s has revealed the residual power of the state over the financial system and the continuing significance of the ‘main bank’ relationship between banks and industry in Japan. The Japanese financial system will probably remain bank-based, state-controlled, and connected with industry through a dense web of non-market relations.
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