annum during this boom, while the prices of goods and services represented by the GNP deflator were quite stable. In the boom periods in the 60's the asset prices also soared, but the prices of goods and services also increased at the rate of more than 5 %. The high level of asset prices generated the expectation of further increase of asset prices in the future and it led to an increase of the demand for assets. Figure 1-1 and 1-2 show the purchases of the share and the land by the different sectors, respectively. The demand for shares increased during 1985-1989 mainly among the financial institutions, while the demand for land by the nonfinancial corporations increased from 1986 to 1990.

The third point, which is related to the second, is that the credit conditions were quite eased. The growth rate of M2+CD exceeded 10 % per annum and the historically low levels of the interest rates emerged. The discount rate was cut stepwise from the level of 4.5 % in January of 1986 to 2.5 % in February of 1987, lowest level in the postwar period.

Next we turn to the characteristics of the recessions the Japanese economy is in the middle of. From Table 2 we point out the following characteristics, most of which are related to the conditions in the financial markets. First the growth rate of investment was reduced to a large extent. Second the asset prices declined by 13.5 % (shares) to 12.0 % (land). Third the growth rate of money supply was lowest (2.48 %) in the postwar recessions. The conditions in the financial or asset markets during the current recession are quite contrasted with those in the preceding booms. The easy credit conditions in the booms are completely reversed to the tight conditions as the asset prices started to decline.

The financial structure of the nonfinancial corporations also changed in the course of the financial liberalization under way. First the issue of the bonds with warrants was approved in 1981. During the period of 1986 to 1989, the corporations raised the funds to a large extent by issuing the bonds with warrants and the convertible bonds under the expectations that the share prices will rise. During this time the equity issue also increased due to high stock prices. The average annual growth rate of the amount raised by the warrant bonds, convertible bonds, and equity for the corporations listed in all the stock exchanges in Japan are 64.8%, 38.8%, and 116%, respectively. However, the bond-financing or equity-financing was not uniformly prevalent across all the corporations. It was restricted only to the large corporations which could have direct access to the capital markets. Figure 2-1 to 2-6 show the time-series pattern of the ratio of equity capital to liabilities plus equity capital for the corporations with different sizes in six industries: all industries, manufacturing, construction, wholesale and retail trade, services, and real estate. The ratio of equity capital increased steadily over time for all industries, manufacturing, and wholesale and retail trade. However the increasing trend is only observed for the corporations in the category of the largest size. This is typically seen for the large corporations whose capital stock is larger than one billion yen. Figure 3 shows the time-series pattern of the ratio of equity capital to liabilities plus equity capital for the corporations whose capital stock is larger than one billion yen for all industries and manufacturing. The ratio increased steadily from 16.8% (19.9%) in 1974 to 26.4% (36.4%) in 1990 for all