In the 1950s and 1960s Japanese banks were actors in a highly regulated financial system in which, given the uncertainties involved, they were willing to take relatively low returns on their lending activities to support the success of the industrial economy. One reason that banks were willing to participate in such a system is that they expected the government would stand behind them should the loans go bad. As central participants in the cross-shareholding movement, the banks themselves were run not for the sake of their stockholders but for the sake of developing the economy. When, in 1990, the stock and land markets crashed, much of the value of the assets against which Japanese banks had lent money vanished into thin air. The long-term problem facing the Japanese is the increase in intergenerational dependence and the associated problem of funding the pension system.
Japan has the most rapidly aging population in the world.
65 and older increased from 5 percent in 1950 to 15 percent in 1995, a period during which the proportion of the U.S. population aged 65 and over rose from 8 percent to just over 12 percent. The question is whether the strategies for dealing with this condition are consistent with solutions to the more immediate problem of restructuring the banking system. The current strategy for handling intergenerational dependence is to keep people working longer so that, as much as possible, they sustain their standard of living through productive employment. Recent reforms of the public pension system involve moderating benefit levels and changing retirement ages.