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Federal Reserve Bank of Cleveland
between government and private financial institutions is escalating in such
fields as shipbuilding and construction
of hotels and cement factories.
The government's choice to rely on
administrative control in the allocation
of resources proved to be extremely
effective during the reconstruction of
the Japaneseeconomy because of the
underdeveloped condition of the capital market. Now, as the capital market
matures, and as economic growth slows
and corporate financial demand declines, the appropriateness of extensive
governmental influence over the flow
of funds is being questioned.

decades, sliding to 39 percent of total
loans outstanding in 1982from 55 percent in 1960.On the other hand, the
lending share of government-related
financial organizations has increased
steadily. The sustained expansion of
loans made by the Trust Fund Bureaufrom 10 percent of the total in 1960to
the current 22.7 percent-has been instrumental in lowering the banking
industry's share of the lending pie.
Since funds garnered in the PSS
are
channeled, via the Trust Fund Bureau,
to governmental lending institutions
and hence to private industry, the more
money post offices absorb and make
available for lending, the steeper the
competition isamong commercial banks.
The private financial sector, in effect,
must compete directly with an institution whose activities are outside the
market economy. Thus, the flow of funds
is being directed, to a significant extent,
by governmental bodies rather than by
the free market; i.e., the tremendous
growth of postal savings deposits has
created a substantial flow of credit from
the private to the public sector, bypassing the market mechanism. A question of
efficiency and equity then arisesconcerning the appropriate allocation of funds
in the nation's economy as a whole.
Major portions of the funds channeled
through government financial institutions via the Treasury Investments and
Loans program went into housing (26.2
percent in FY 1981), small enterprise
promotion (19.6percent), living environment (13.9 percent), and transportation
and communication (10.1 percentj.?
These sectors often find it difficult to
attract capital without paying a premium. Moreover, the social and economic
benefits derived from public intervention may justify the intervention itself.
Intertwined with criticism over the
handling of postal savings is the issue of
the government's "crowding out" the
private sector by encroaching on areas
of private financing. Competition

Implications for Monetary Policy
The PSS
sets interest rates paid on its
own deposits independently of the
monetary authorities. The usual resistance of the MPT to cut interest rates on
postal savings accounts when the BOJ
decides to lower the discount rate
influences the timing of money market
effects desired by the BOJ. When declines of interest rates on postal
deposits lag behind those of private
financial institutions, a shift of funds
to the PSS
often results, reducing the
share of funds made available through
private sources, particularly smaller
banks and thrift institutions. In July 1972
and in May 1977,for example, when
interest-rate declines in PSSaccounts
lagged behind the reductions in private-sector deposits by 15 days, the total
value of postal savings, as a proportion
of all fixed deposits, increased
substantially. For the same reason,
during July-September 1980,the
accounts of the Treasury moved into a
sizable surplus, the counterpart of
which was a record shortage of funds in
the money markets."
The MOF and the BOJ are advocating
unification of the present two-tier
decision making process on interest
rates, claiming that the effective
operation of monetary policy is hin-

5. See "Highlight of FY1981 Budget Treasury
Investments
and loans Program," japan
Economic journal, January 13, 1981, p. 15.

6. "Trends in Personal Savings and Personal
Financial Assets Selection,"
Bank of Japan, Special
Paper #93 (April 1981), pp. 15-16.

dered because such a large source of
funds is outside the scope of their direct
control. The extent to which the PSShas
reduced monetary control in Japan is
not clear, however. Although the PSS
maintains a large share of personal
deposits and the percentage of loans
generated by commercial banks has
steadily declined, the PSS
channels the
vast majority of its funds through
government agencies. Because the MOF
monitors these agencies (loan rates
have to be approved by the MOF), the
overall range of monetary and credit
control has not been diminished by the
shift to postal savings-the composition
has merely changed. If, however, the
PSS
follows through with plans to
expand its own lending capacity
(currently a personal loan of up to
about $2,800per borrower is allowed)
to include housing finance and educational loans, the credit it extends will
be outside the control of the monetary
authorities and could weaken the
effectiveness of monetary policy.
Conclusion
The Japanesegovernment has played
Federal Reserve Bank of Cleveland
Research Department
P.O. Box 6387
Cleveland, OH 44101

an active and important role in financial
intermediation and credit allocation. By
collecting personal savings through the
PSS
and then allocating them to public
institutions, the Japanesegovernment
has structured an effective system that
functions in concert with its industrial
and social policies. Although unsophisticated in terms of free-market fluctuations, this system provided the needed
capital for postwar economic reconstruction. Now, however, the financial
community isconcerned about the power
that the PSShas amassed and the
encroachment of government institutions
in areas of private-sector finance. The
debate centers around the issue of
whether a bureaucracy is better qualified to direct the flow of credit than a
private market. Also debated is how
increased governmental intervention
will affect the efficiency of a freemarket system. Determining the appropriateness of government vs. private
financing is a problem not peculiar to
the Japanesesituation. Indeed,
American policymakers are now raising
similar issuesabout the development of
a national industrial policy.
BULK RATE
U.S. Postage Paid
Cleveland, OH
Permit No, 385

~£QnomicCommentary
The Japanese Postal Savings System:
A State-Run Financial Monster?
by Laura A. Kuhn

apan maintains the highest
personal savings rate of all the
major industrialized countries. In
1982the Japanese personal savings
rate was about 19.3 percent of
disposable income-almost three times
that of the United States.' Many analysts
consider the thrift of the Japanese
people to be the primary reason for
that country's tremendous industrial
growth and technological advancement
after World War II. Through the postal
savings system (PSS),the Japanesegovernment has converted personal savings
deposits into long-term capital for
industrial, trade, infrastructural, and
social development. The state-run PSS
has played a vital role in channeling
assetsto the private sector and in
helping to finance the huge government deficits.
Post office savings have mushroomed
1. For additional
information
on the savings
rate, see Organization
for Economic Cooperation
and Development,
OECD Economic Outlook,
July 1983.
Although the observed frugality in household
savings results from many factors, much can be
explained
by the rapid growth in income and by
institutional
factors, such as the wage payment
system, the underdeveloped
condition
of the
social security system, the limited availability of
consumer
and housing credit, and the tax system.
See Henry C. and Mable I. Wallich, "Banking and
Finance," in Hugh Patrick and Henry Rosovsky,
Eds., Asia's New Giant, Brookings Institution
(Washington:
1976), pp. 249-315.

Address Correction Requested: Pleasesend corrected mailing label to the Federal
ReserveBank of Cleveland, ResearchDepartment, P.O. Box 6387,Cleveland, OH 44101.

September 26, 1983

Laura A. Kuhn, a research assistant with the
Federal Reserve Bank of Cleveland, studied in
japan in 1982.
The views stated herein are those of the author
and not necessarily those of the Federal Reserve
Bank of Cleveland or of the Board of Governors
of the Federal Reserve System.

in the past two decades. With a network
of over 22,400branches, the PSShad
deposits of more than $330 billion in
1983:IIQ, making it the largest recipient
of deposits in the world.'
The PSS
competes directly with commercial banks
for personal deposits, which make up
about 99 percent of its deposit base,
compared with lessthan 40 percent for
commercial banks. An attractive savings
source for Japanese households, the PSS
can provide more favorable rates,
terms, and tax treatment than commercial banks. Consequently, the financial
community is concerned about the
unrestricted expansion of post office
savings, which are viewed as a serious
threat to the commercial banking
industry. This Economic Commentary
discussesJapan's postal savings system,
its characteristics and problems, and its
effect on the Japaneseeconomy.
The Japanese Financial System
In contrast to the U.S. financial
system, the Japanesefinancial market
structure is highly specialized. The
system shows extensive separation of
financial activities, a comparatively high
degree of regulation and control of
private financial institutions by the
monetary authorities, and a much more
active governmental role in financial
2. The deposits of the PSS are about three times
those of the outstanding
accounts of Banque
Nationale de Paris (the world's largest bank in
terms of deposits) and about five times those of
Japan's largest bank. See Gordon F. Boreharn,
"The Financial System: One Reason for Japan's
Success," Canadian Banker and fCB Review, vol.
88, no. 6 (December
1981), pp. 12-17.

intermediation and credit allocation.'
The main overseer of almost all aspects
of the Japanese financial system is the
Ministry of Finance (MOF). The MOF is
the powerful budget-making agency
with many responsibilities, including
financial management policy of the
central government. The only exception
to the MOF's domain is the PSS,which
is under the authority of the Ministry of
Posts and Telecommunications (MPT).
The central bank, the Bank of Japan
(BOj), works in concert with but under
guidelines set by the MOF in determining and implementing national monetary policies. The major instruments of
monetary policy available to the BOJ
are similar to tools used by the Federal
Reserve System. Bank credit replaces a
large portion of equity capital in Japan,
i.e., many Japanese firms are very highly
leveraged, depending heavily on bank
credit rather than on forms of internal
finance. Thus, the monetary authorities
rely heavily on credit controls (particularly ceilings on central bank credit to
private banks) and "window guidance"
(the nature and levels of bank lending
being directed by the BOJ according to
national economic and industrial policies). Rather than change reserve ratios
or perform open-market operations,
the BOJ influences financial markets
primarily by changing its credit and
discount policies.
To meet the high credit demands of
Japanese firms, commercial banks borrow heavily from the BOJ through its
discount window. The BOJ discount rate
is the foundation of the interest-rate
structure of the entire financial system.
Short-term interest rates, along with the
lending rates of private financial institutions, generally move by the same margin
as the change in the discount rate.
Interest rates on postal savings deposits
are again the exception, being deter3. For an overview of Japan's financial system
and a description of the current liberalization
process, see Charles Pigott, "Financial Reform in
Japan," in Financial Development and Reform in
the Pacific Basin, Federal Reserve Bank of San
Francisco, Economic Review, no. 1 (Winter 1983),
pp.25-46.

mined independently by a committee
of the MPT.
The government plays a direct and
active role in financial intermediation
and credit allocation. These functions
are central to the implementation of
Japan's industrial and social policies.
Funds are channeled through a group
of government-owned
banks and finance
corporations to promote and develop
key industries, foreign trade, small- and
medium-sized enterprises, agriculture,
housing, and social infrastructure. The
Japanese public is a major supplier of
funds (savings) to these institutions, the
primary intermediary being the PSS.
Post office savings, which now
account for about 30 percent of the
entire personal savings of Japan, are
turned over to the Trust Fund Bureau
(TFB) of the Ministry of Finance. The
TFB channels the money, along with
pension-fund payments, into areas
specified for development (see figure).
The TFB receives slightly more than
one-half of its financial resources from
post office savings and is the main supplier of funds for the Treasury Investrnents and Loans program. Under this
program, which is determined each year
along with the national budget, funds
are allocated to various governmentaffiliated agencies. In the 1950s and
1960s, funds from Treasury Investments
and Loans were used primarily for
large-scale industrial projects, foreigntrade finance, and promotion of smalland medium-sized enterprises. The focus
of the program shifted in the 1970s to
mortgage financing and social development, reflecting the maturation of the
industrial structure and the real need
for social infrastructure investment. The
current phase emphasizes energy resources and technology as well. Last
year Treasury Investments and Loans
channeled more than $72 billion into
government-lending
institutions, and
appropriation requests for FY 1983 rose
to a high of $86 billion.
Postal savings funds also are used, via
the TFB, to finance part of the government's budget deficit. Absorbing almost

Flow of Personal Savings through

I
I

Treasury Investments
and Loans budget
appropriation for
FY 1982aj billions of
dollars @ 249.5 yen
per dollar

the Postal Savings System
Personal
savings
Postal savings
system

I
I I

Trust Fund Bureau

Postal life Insurance
and Annuity Fund

(I
Public
enterprise

I I

I

Japan National
Railways .........................

~

Treasury Investments
and loans

2J~
I

Public
corporations

II

I

••

h

local
governments

I

Finance
corporations

I I

I
I

13.231

Special accounts ..................

Nippon Telegraph &
Telephone Public Corp ....... 0.60

J

Government
bonds

local governments .............

4.25

I

Pension
funds

1.64

Japan Development Bank ....... 3.20
Hokkaido & Tohoku Development Corporation .............

Housing & Urban Development
Corporation ....................
2.91
Pension Welfare Service
Corporation ....................

,

3.48

Japan Railway Construction
Corporation ....................

0.46

Overseas Economic
Cooperation Fund ............

0.83

Others ..............................

,

3.04

Japan Highway Corp .............

0.24

Export-Import Bank of Japan ... 3.58

2.63

Small Business Finance
Corporation ....................

6.17

People's Finance Corporation .............................

7.73

Shoko Chukin Bank ..............

0.29

Housing loan Corporation .............................

13.61

Agriculture, Forestry,
& Fishery Finance Corp .......

2.28

Medical Care Facilities
Finance Corporation ..........

0.40

a. Figures exclude government guaranteed bonds
and borrowing.

Environmental Sanitation Business Finance Corportion ...... 1.07

SOURCE: Bank of Japan, Economic Statistics Annual 1982,
March 1983.

Okinawa Development
Finance Corporation ..........

one-fourth of the total government
bonds outstanding, the TFB serves as an
outlet for bonds that the central bank
purchases in the secondary market. The
underwriting of government bonds is,
however, one of the more controversial
uses of postal savings proceeds. Making
it easier for the government to maintain
expenditures in excess of revenues may

0.46

lead to an expansion in the fiscal deficit.
Reasons for Growth
The PSShas become highly controversial, primarily because the size of its
financial base has grown at such an astonishing rate over the past 20 years. In the
mid-1960s, PSSdeposits topped the 2
trillion yen level, swelling to over 24

trillion yen by 1975-a growth of 9 times
in 10 years. The growth of postal savings
deposits has been particularly steep in
recent years, soaring to over 80 trillion
yen in August 1983. The PSShas captured
an increasingly larger share of personal
savings, while the share of commercial
banks and savings institutions has declined steadily since the mid-1960s. PSS
deposits now total more than five times
the deposits of Japan's largest
commercial bank.
There are several reasons for the
rapid growth of postal savings and individuals' increasing preference for this
system over other financial institutions.
With more than twice as many branches
as all commercial banking institutions
combined, the PSSis very accessible to
depositors, even in remote parts of the
country. In addition to installing cash
dispensers at the major post offices, the
PSS
recently implemented an on-line computerized network that enables depositors to withdraw or deposit at anyone
of a myriad of nationwide branches.
The PSShas mustered a strong political
backing within local governments and
in the Diet (parliament). This political
strength has aided in the passage of
favorable legislation, the most important elements of which are preferential
rates, terms, and tax treatment. The
private banking industry views these
advantages as grossly unfair, considering the PSSto be a "state-run
financial monster."
Preferential tax treatment.
In
contrast to the United States, where tax
preference primarily is given to
consumption
(or borrowing), the Japanese government promotes saving and
grants special tax exemptions to encourage personal savings. Under the current
Japanese tax system, an individual is
exempt from taxes on interest income
from bank deposits and bonds with a principal balance of up to 3 million yen
(about $13,000) and on the interest inco~e from an additional 3 million yen
in post-office accounts. Interest on postal savings is always tax free, but an
individual can hold no more than 3 mil-

lion yen in this type of account.
The absence of required formal
reporting of PSSaccounts has led to
widespread abuse of tax-exemption
privileges. With little difficulty,
individuals can open multiple accounts
in excess of the legal limit. In 1980 the
PSSmaintained a phenomenal 310 million accounts-more
than two and onehalf times the total Japanese population.!
Unfortunately, tax evasion is
relatively easy and fairly common, much
to the dismay of the government whose
budget deficit amounted to $44 billion
last year. In contrast, savers at private
financial institutions must file a return
to receive tax exemptions, making it
fairly easy to monitor these accounts.
Bank deposits are cross-checked to ensure that the 35 percent withholding tax
on interest is deducted from any proceeds over the tax-exempt limit.
Interest-rate advantages. Another
issue in the postal savings controversy is
the dual system by which interest rates
are set. Postal savings rates are decided
by a special committee of the MPT,
while a committee of the finance
ministry and the central bank set market and bank account rates. Because the
PSSis not under the jurisdiction of the
monetary authorities, PSSdeposits generally earn higher rates of interest than
bank deposits.
lending and
the Allocation of Capital
The disparity of interest rates in favor
of the PSSand the security and flexibility provided by its accounts have
steadily drained funds from private
commercial banks. Post office savings
are now posing a threat to commercial
banks, not only in the accumulation of
deposits but also in lending to both
private industry and individuals. The
lending share of commercial banks has
declined consistently in the past two
4. Of the total postal savings accounts, 240
million were time deposits (about 80 percent of
the total) and 70 million were ordinary deposits.
See Masahiko ishizuka, "Juggernaut in Domestic
Financial Scene?," Japan Economic Journa/,
October 7, 1980.

intermediation and credit allocation.'
The main overseer of almost all aspects
of the Japanese financial system is the
Ministry of Finance (MOF). The MOF is
the powerful budget-making agency
with many responsibilities, including
financial management policy of the
central government. The only exception
to the MOF's domain is the PSS,which
is under the authority of the Ministry of
Posts and Telecommunications (MPT).
The central bank, the Bank of Japan
(BOj), works in concert with but under
guidelines set by the MOF in determining and implementing national monetary policies. The major instruments of
monetary policy available to the BOJ
are similar to tools used by the Federal
Reserve System. Bank credit replaces a
large portion of equity capital in Japan,
i.e., many Japanese firms are very highly
leveraged, depending heavily on bank
credit rather than on forms of internal
finance. Thus, the monetary authorities
rely heavily on credit controls (particularly ceilings on central bank credit to
private banks) and "window guidance"
(the nature and levels of bank lending
being directed by the BOJ according to
national economic and industrial policies). Rather than change reserve ratios
or perform open-market operations,
the BOJ influences financial markets
primarily by changing its credit and
discount policies.
To meet the high credit demands of
Japanese firms, commercial banks borrow heavily from the BOJ through its
discount window. The BOJ discount rate
is the foundation of the interest-rate
structure of the entire financial system.
Short-term interest rates, along with the
lending rates of private financial institutions, generally move by the same margin
as the change in the discount rate.
Interest rates on postal savings deposits
are again the exception, being deter3. For an overview of Japan's financial system
and a description of the current liberalization
process, see Charles Pigott, "Financial Reform in
Japan," in Financial Development and Reform in
the Pacific Basin, Federal Reserve Bank of San
Francisco, Economic Review, no. 1 (Winter 1983),
pp.25-46.

mined independently by a committee
of the MPT.
The government plays a direct and
active role in financial intermediation
and credit allocation. These functions
are central to the implementation of
Japan's industrial and social policies.
Funds are channeled through a group
of government-owned
banks and finance
corporations to promote and develop
key industries, foreign trade, small- and
medium-sized enterprises, agriculture,
housing, and social infrastructure. The
Japanese public is a major supplier of
funds (savings) to these institutions, the
primary intermediary being the PSS.
Post office savings, which now
account for about 30 percent of the
entire personal savings of Japan, are
turned over to the Trust Fund Bureau
(TFB) of the Ministry of Finance. The
TFB channels the money, along with
pension-fund payments, into areas
specified for development (see figure).
The TFB receives slightly more than
one-half of its financial resources from
post office savings and is the main supplier of funds for the Treasury Investrnents and Loans program. Under this
program, which is determined each year
along with the national budget, funds
are allocated to various governmentaffiliated agencies. In the 1950s and
1960s, funds from Treasury Investments
and Loans were used primarily for
large-scale industrial projects, foreigntrade finance, and promotion of smalland medium-sized enterprises. The focus
of the program shifted in the 1970s to
mortgage financing and social development, reflecting the maturation of the
industrial structure and the real need
for social infrastructure investment. The
current phase emphasizes energy resources and technology as well. Last
year Treasury Investments and Loans
channeled more than $72 billion into
government-lending
institutions, and
appropriation requests for FY 1983 rose
to a high of $86 billion.
Postal savings funds also are used, via
the TFB, to finance part of the government's budget deficit. Absorbing almost

Flow of Personal Savings through

I
I

Treasury Investments
and Loans budget
appropriation for
FY 1982aj billions of
dollars @ 249.5 yen
per dollar

the Postal Savings System
Personal
savings
Postal savings
system

I
I I

Trust Fund Bureau

Postal life Insurance
and Annuity Fund

(I
Public
enterprise

I I

I

Japan National
Railways .........................

~

Treasury Investments
and loans

2J~
I

Public
corporations

II

I

••

h

local
governments

I

Finance
corporations

I I

I
I

13.231

Special accounts ..................

Nippon Telegraph &
Telephone Public Corp ....... 0.60

J

Government
bonds

local governments .............

4.25

I

Pension
funds

1.64

Japan Development Bank ....... 3.20
Hokkaido & Tohoku Development Corporation .............

Housing & Urban Development
Corporation ....................
2.91
Pension Welfare Service
Corporation ....................

,

3.48

Japan Railway Construction
Corporation ....................

0.46

Overseas Economic
Cooperation Fund ............

0.83

Others ..............................

,

3.04

Japan Highway Corp .............

0.24

Export-Import Bank of Japan ... 3.58

2.63

Small Business Finance
Corporation ....................

6.17

People's Finance Corporation .............................

7.73

Shoko Chukin Bank ..............

0.29

Housing loan Corporation .............................

13.61

Agriculture, Forestry,
& Fishery Finance Corp .......

2.28

Medical Care Facilities
Finance Corporation ..........

0.40

a. Figures exclude government guaranteed bonds
and borrowing.

Environmental Sanitation Business Finance Corportion ...... 1.07

SOURCE: Bank of Japan, Economic Statistics Annual 1982,
March 1983.

Okinawa Development
Finance Corporation ..........

one-fourth of the total government
bonds outstanding, the TFB serves as an
outlet for bonds that the central bank
purchases in the secondary market. The
underwriting of government bonds is,
however, one of the more controversial
uses of postal savings proceeds. Making
it easier for the government to maintain
expenditures in excess of revenues may

0.46

lead to an expansion in the fiscal deficit.
Reasons for Growth
The PSShas become highly controversial, primarily because the size of its
financial base has grown at such an astonishing rate over the past 20 years. In the
mid-1960s, PSSdeposits topped the 2
trillion yen level, swelling to over 24

trillion yen by 1975-a growth of 9 times
in 10 years. The growth of postal savings
deposits has been particularly steep in
recent years, soaring to over 80 trillion
yen in August 1983. The PSShas captured
an increasingly larger share of personal
savings, while the share of commercial
banks and savings institutions has declined steadily since the mid-1960s. PSS
deposits now total more than five times
the deposits of Japan's largest
commercial bank.
There are several reasons for the
rapid growth of postal savings and individuals' increasing preference for this
system over other financial institutions.
With more than twice as many branches
as all commercial banking institutions
combined, the PSSis very accessible to
depositors, even in remote parts of the
country. In addition to installing cash
dispensers at the major post offices, the
PSS
recently implemented an on-line computerized network that enables depositors to withdraw or deposit at anyone
of a myriad of nationwide branches.
The PSShas mustered a strong political
backing within local governments and
in the Diet (parliament). This political
strength has aided in the passage of
favorable legislation, the most important elements of which are preferential
rates, terms, and tax treatment. The
private banking industry views these
advantages as grossly unfair, considering the PSSto be a "state-run
financial monster."
Preferential tax treatment.
In
contrast to the United States, where tax
preference primarily is given to
consumption
(or borrowing), the Japanese government promotes saving and
grants special tax exemptions to encourage personal savings. Under the current
Japanese tax system, an individual is
exempt from taxes on interest income
from bank deposits and bonds with a principal balance of up to 3 million yen
(about $13,000) and on the interest inco~e from an additional 3 million yen
in post-office accounts. Interest on postal savings is always tax free, but an
individual can hold no more than 3 mil-

lion yen in this type of account.
The absence of required formal
reporting of PSSaccounts has led to
widespread abuse of tax-exemption
privileges. With little difficulty,
individuals can open multiple accounts
in excess of the legal limit. In 1980 the
PSSmaintained a phenomenal 310 million accounts-more
than two and onehalf times the total Japanese population.!
Unfortunately, tax evasion is
relatively easy and fairly common, much
to the dismay of the government whose
budget deficit amounted to $44 billion
last year. In contrast, savers at private
financial institutions must file a return
to receive tax exemptions, making it
fairly easy to monitor these accounts.
Bank deposits are cross-checked to ensure that the 35 percent withholding tax
on interest is deducted from any proceeds over the tax-exempt limit.
Interest-rate advantages. Another
issue in the postal savings controversy is
the dual system by which interest rates
are set. Postal savings rates are decided
by a special committee of the MPT,
while a committee of the finance
ministry and the central bank set market and bank account rates. Because the
PSSis not under the jurisdiction of the
monetary authorities, PSSdeposits generally earn higher rates of interest than
bank deposits.
lending and
the Allocation of Capital
The disparity of interest rates in favor
of the PSSand the security and flexibility provided by its accounts have
steadily drained funds from private
commercial banks. Post office savings
are now posing a threat to commercial
banks, not only in the accumulation of
deposits but also in lending to both
private industry and individuals. The
lending share of commercial banks has
declined consistently in the past two
4. Of the total postal savings accounts, 240
million were time deposits (about 80 percent of
the total) and 70 million were ordinary deposits.
See Masahiko ishizuka, "Juggernaut in Domestic
Financial Scene?," Japan Economic Journa/,
October 7, 1980.

intermediation and credit allocation.'
The main overseer of almost all aspects
of the Japanese financial system is the
Ministry of Finance (MOF). The MOF is
the powerful budget-making agency
with many responsibilities, including
financial management policy of the
central government. The only exception
to the MOF's domain is the PSS,which
is under the authority of the Ministry of
Posts and Telecommunications (MPT).
The central bank, the Bank of Japan
(BOj), works in concert with but under
guidelines set by the MOF in determining and implementing national monetary policies. The major instruments of
monetary policy available to the BOJ
are similar to tools used by the Federal
Reserve System. Bank credit replaces a
large portion of equity capital in Japan,
i.e., many Japanese firms are very highly
leveraged, depending heavily on bank
credit rather than on forms of internal
finance. Thus, the monetary authorities
rely heavily on credit controls (particularly ceilings on central bank credit to
private banks) and "window guidance"
(the nature and levels of bank lending
being directed by the BOJ according to
national economic and industrial policies). Rather than change reserve ratios
or perform open-market operations,
the BOJ influences financial markets
primarily by changing its credit and
discount policies.
To meet the high credit demands of
Japanese firms, commercial banks borrow heavily from the BOJ through its
discount window. The BOJ discount rate
is the foundation of the interest-rate
structure of the entire financial system.
Short-term interest rates, along with the
lending rates of private financial institutions, generally move by the same margin
as the change in the discount rate.
Interest rates on postal savings deposits
are again the exception, being deter3. For an overview of Japan's financial system
and a description of the current liberalization
process, see Charles Pigott, "Financial Reform in
Japan," in Financial Development and Reform in
the Pacific Basin, Federal Reserve Bank of San
Francisco, Economic Review, no. 1 (Winter 1983),
pp.25-46.

mined independently by a committee
of the MPT.
The government plays a direct and
active role in financial intermediation
and credit allocation. These functions
are central to the implementation of
Japan's industrial and social policies.
Funds are channeled through a group
of government-owned
banks and finance
corporations to promote and develop
key industries, foreign trade, small- and
medium-sized enterprises, agriculture,
housing, and social infrastructure. The
Japanese public is a major supplier of
funds (savings) to these institutions, the
primary intermediary being the PSS.
Post office savings, which now
account for about 30 percent of the
entire personal savings of Japan, are
turned over to the Trust Fund Bureau
(TFB) of the Ministry of Finance. The
TFB channels the money, along with
pension-fund payments, into areas
specified for development (see figure).
The TFB receives slightly more than
one-half of its financial resources from
post office savings and is the main supplier of funds for the Treasury Investrnents and Loans program. Under this
program, which is determined each year
along with the national budget, funds
are allocated to various governmentaffiliated agencies. In the 1950s and
1960s, funds from Treasury Investments
and Loans were used primarily for
large-scale industrial projects, foreigntrade finance, and promotion of smalland medium-sized enterprises. The focus
of the program shifted in the 1970s to
mortgage financing and social development, reflecting the maturation of the
industrial structure and the real need
for social infrastructure investment. The
current phase emphasizes energy resources and technology as well. Last
year Treasury Investments and Loans
channeled more than $72 billion into
government-lending
institutions, and
appropriation requests for FY 1983 rose
to a high of $86 billion.
Postal savings funds also are used, via
the TFB, to finance part of the government's budget deficit. Absorbing almost

Flow of Personal Savings through

I
I

Treasury Investments
and Loans budget
appropriation for
FY 1982aj billions of
dollars @ 249.5 yen
per dollar

the Postal Savings System
Personal
savings
Postal savings
system

I
I I

Trust Fund Bureau

Postal life Insurance
and Annuity Fund

(I
Public
enterprise

I I

I

Japan National
Railways .........................

~

Treasury Investments
and loans

2J~
I

Public
corporations

II

I

••

h

local
governments

I

Finance
corporations

I I

I
I

13.231

Special accounts ..................

Nippon Telegraph &
Telephone Public Corp ....... 0.60

J

Government
bonds

local governments .............

4.25

I

Pension
funds

1.64

Japan Development Bank ....... 3.20
Hokkaido & Tohoku Development Corporation .............

Housing & Urban Development
Corporation ....................
2.91
Pension Welfare Service
Corporation ....................

,

3.48

Japan Railway Construction
Corporation ....................

0.46

Overseas Economic
Cooperation Fund ............

0.83

Others ..............................

,

3.04

Japan Highway Corp .............

0.24

Export-Import Bank of Japan ... 3.58

2.63

Small Business Finance
Corporation ....................

6.17

People's Finance Corporation .............................

7.73

Shoko Chukin Bank ..............

0.29

Housing loan Corporation .............................

13.61

Agriculture, Forestry,
& Fishery Finance Corp .......

2.28

Medical Care Facilities
Finance Corporation ..........

0.40

a. Figures exclude government guaranteed bonds
and borrowing.

Environmental Sanitation Business Finance Corportion ...... 1.07

SOURCE: Bank of Japan, Economic Statistics Annual 1982,
March 1983.

Okinawa Development
Finance Corporation ..........

one-fourth of the total government
bonds outstanding, the TFB serves as an
outlet for bonds that the central bank
purchases in the secondary market. The
underwriting of government bonds is,
however, one of the more controversial
uses of postal savings proceeds. Making
it easier for the government to maintain
expenditures in excess of revenues may

0.46

lead to an expansion in the fiscal deficit.
Reasons for Growth
The PSShas become highly controversial, primarily because the size of its
financial base has grown at such an astonishing rate over the past 20 years. In the
mid-1960s, PSSdeposits topped the 2
trillion yen level, swelling to over 24

trillion yen by 1975-a growth of 9 times
in 10 years. The growth of postal savings
deposits has been particularly steep in
recent years, soaring to over 80 trillion
yen in August 1983. The PSShas captured
an increasingly larger share of personal
savings, while the share of commercial
banks and savings institutions has declined steadily since the mid-1960s. PSS
deposits now total more than five times
the deposits of Japan's largest
commercial bank.
There are several reasons for the
rapid growth of postal savings and individuals' increasing preference for this
system over other financial institutions.
With more than twice as many branches
as all commercial banking institutions
combined, the PSSis very accessible to
depositors, even in remote parts of the
country. In addition to installing cash
dispensers at the major post offices, the
PSS
recently implemented an on-line computerized network that enables depositors to withdraw or deposit at anyone
of a myriad of nationwide branches.
The PSShas mustered a strong political
backing within local governments and
in the Diet (parliament). This political
strength has aided in the passage of
favorable legislation, the most important elements of which are preferential
rates, terms, and tax treatment. The
private banking industry views these
advantages as grossly unfair, considering the PSSto be a "state-run
financial monster."
Preferential tax treatment.
In
contrast to the United States, where tax
preference primarily is given to
consumption
(or borrowing), the Japanese government promotes saving and
grants special tax exemptions to encourage personal savings. Under the current
Japanese tax system, an individual is
exempt from taxes on interest income
from bank deposits and bonds with a principal balance of up to 3 million yen
(about $13,000) and on the interest inco~e from an additional 3 million yen
in post-office accounts. Interest on postal savings is always tax free, but an
individual can hold no more than 3 mil-

lion yen in this type of account.
The absence of required formal
reporting of PSSaccounts has led to
widespread abuse of tax-exemption
privileges. With little difficulty,
individuals can open multiple accounts
in excess of the legal limit. In 1980 the
PSSmaintained a phenomenal 310 million accounts-more
than two and onehalf times the total Japanese population.!
Unfortunately, tax evasion is
relatively easy and fairly common, much
to the dismay of the government whose
budget deficit amounted to $44 billion
last year. In contrast, savers at private
financial institutions must file a return
to receive tax exemptions, making it
fairly easy to monitor these accounts.
Bank deposits are cross-checked to ensure that the 35 percent withholding tax
on interest is deducted from any proceeds over the tax-exempt limit.
Interest-rate advantages. Another
issue in the postal savings controversy is
the dual system by which interest rates
are set. Postal savings rates are decided
by a special committee of the MPT,
while a committee of the finance
ministry and the central bank set market and bank account rates. Because the
PSSis not under the jurisdiction of the
monetary authorities, PSSdeposits generally earn higher rates of interest than
bank deposits.
lending and
the Allocation of Capital
The disparity of interest rates in favor
of the PSSand the security and flexibility provided by its accounts have
steadily drained funds from private
commercial banks. Post office savings
are now posing a threat to commercial
banks, not only in the accumulation of
deposits but also in lending to both
private industry and individuals. The
lending share of commercial banks has
declined consistently in the past two
4. Of the total postal savings accounts, 240
million were time deposits (about 80 percent of
the total) and 70 million were ordinary deposits.
See Masahiko ishizuka, "Juggernaut in Domestic
Financial Scene?," Japan Economic Journa/,
October 7, 1980.

Federal Reserve Bank of Cleveland
between government and private financial institutions is escalating in such
fields as shipbuilding and construction
of hotels and cement factories.
The government's choice to rely on
administrative control in the allocation
of resources proved to be extremely
effective during the reconstruction of
the Japaneseeconomy because of the
underdeveloped condition of the capital market. Now, as the capital market
matures, and as economic growth slows
and corporate financial demand declines, the appropriateness of extensive
governmental influence over the flow
of funds is being questioned.

decades, sliding to 39 percent of total
loans outstanding in 1982from 55 percent in 1960.On the other hand, the
lending share of government-related
financial organizations has increased
steadily. The sustained expansion of
loans made by the Trust Fund Bureaufrom 10 percent of the total in 1960to
the current 22.7 percent-has been instrumental in lowering the banking
industry's share of the lending pie.
Since funds garnered in the PSS
are
channeled, via the Trust Fund Bureau,
to governmental lending institutions
and hence to private industry, the more
money post offices absorb and make
available for lending, the steeper the
competition isamong commercial banks.
The private financial sector, in effect,
must compete directly with an institution whose activities are outside the
market economy. Thus, the flow of funds
is being directed, to a significant extent,
by governmental bodies rather than by
the free market; i.e., the tremendous
growth of postal savings deposits has
created a substantial flow of credit from
the private to the public sector, bypassing the market mechanism. A question of
efficiency and equity then arisesconcerning the appropriate allocation of funds
in the nation's economy as a whole.
Major portions of the funds channeled
through government financial institutions via the Treasury Investments and
Loans program went into housing (26.2
percent in FY 1981), small enterprise
promotion (19.6percent), living environment (13.9 percent), and transportation
and communication (10.1 percentj.?
These sectors often find it difficult to
attract capital without paying a premium. Moreover, the social and economic
benefits derived from public intervention may justify the intervention itself.
Intertwined with criticism over the
handling of postal savings is the issue of
the government's "crowding out" the
private sector by encroaching on areas
of private financing. Competition

Implications for Monetary Policy
The PSS
sets interest rates paid on its
own deposits independently of the
monetary authorities. The usual resistance of the MPT to cut interest rates on
postal savings accounts when the BOJ
decides to lower the discount rate
influences the timing of money market
effects desired by the BOJ. When declines of interest rates on postal
deposits lag behind those of private
financial institutions, a shift of funds
to the PSS
often results, reducing the
share of funds made available through
private sources, particularly smaller
banks and thrift institutions. In July 1972
and in May 1977,for example, when
interest-rate declines in PSSaccounts
lagged behind the reductions in private-sector deposits by 15 days, the total
value of postal savings, as a proportion
of all fixed deposits, increased
substantially. For the same reason,
during July-September 1980,the
accounts of the Treasury moved into a
sizable surplus, the counterpart of
which was a record shortage of funds in
the money markets."
The MOF and the BOJ are advocating
unification of the present two-tier
decision making process on interest
rates, claiming that the effective
operation of monetary policy is hin-

5. See "Highlight of FY1981 Budget Treasury
Investments
and loans Program," japan
Economic journal, January 13, 1981, p. 15.

6. "Trends in Personal Savings and Personal
Financial Assets Selection,"
Bank of Japan, Special
Paper #93 (April 1981), pp. 15-16.

dered because such a large source of
funds is outside the scope of their direct
control. The extent to which the PSShas
reduced monetary control in Japan is
not clear, however. Although the PSS
maintains a large share of personal
deposits and the percentage of loans
generated by commercial banks has
steadily declined, the PSS
channels the
vast majority of its funds through
government agencies. Because the MOF
monitors these agencies (loan rates
have to be approved by the MOF), the
overall range of monetary and credit
control has not been diminished by the
shift to postal savings-the composition
has merely changed. If, however, the
PSS
follows through with plans to
expand its own lending capacity
(currently a personal loan of up to
about $2,800per borrower is allowed)
to include housing finance and educational loans, the credit it extends will
be outside the control of the monetary
authorities and could weaken the
effectiveness of monetary policy.
Conclusion
The Japanesegovernment has played
Federal Reserve Bank of Cleveland
Research Department
P.O. Box 6387
Cleveland, OH 44101

an active and important role in financial
intermediation and credit allocation. By
collecting personal savings through the
PSS
and then allocating them to public
institutions, the Japanesegovernment
has structured an effective system that
functions in concert with its industrial
and social policies. Although unsophisticated in terms of free-market fluctuations, this system provided the needed
capital for postwar economic reconstruction. Now, however, the financial
community isconcerned about the power
that the PSShas amassed and the
encroachment of government institutions
in areas of private-sector finance. The
debate centers around the issue of
whether a bureaucracy is better qualified to direct the flow of credit than a
private market. Also debated is how
increased governmental intervention
will affect the efficiency of a freemarket system. Determining the appropriateness of government vs. private
financing is a problem not peculiar to
the Japanesesituation. Indeed,
American policymakers are now raising
similar issuesabout the development of
a national industrial policy.
BULK RATE
U.S. Postage Paid
Cleveland, OH
Permit No, 385

~£QnomicCommentary
The Japanese Postal Savings System:
A State-Run Financial Monster?
by Laura A. Kuhn

apan maintains the highest
personal savings rate of all the
major industrialized countries. In
1982the Japanese personal savings
rate was about 19.3 percent of
disposable income-almost three times
that of the United States.' Many analysts
consider the thrift of the Japanese
people to be the primary reason for
that country's tremendous industrial
growth and technological advancement
after World War II. Through the postal
savings system (PSS),the Japanesegovernment has converted personal savings
deposits into long-term capital for
industrial, trade, infrastructural, and
social development. The state-run PSS
has played a vital role in channeling
assetsto the private sector and in
helping to finance the huge government deficits.
Post office savings have mushroomed
1. For additional
information
on the savings
rate, see Organization
for Economic Cooperation
and Development,
OECD Economic Outlook,
July 1983.
Although the observed frugality in household
savings results from many factors, much can be
explained
by the rapid growth in income and by
institutional
factors, such as the wage payment
system, the underdeveloped
condition
of the
social security system, the limited availability of
consumer
and housing credit, and the tax system.
See Henry C. and Mable I. Wallich, "Banking and
Finance," in Hugh Patrick and Henry Rosovsky,
Eds., Asia's New Giant, Brookings Institution
(Washington:
1976), pp. 249-315.

Address Correction Requested: Pleasesend corrected mailing label to the Federal
ReserveBank of Cleveland, ResearchDepartment, P.O. Box 6387,Cleveland, OH 44101.

September 26, 1983

Laura A. Kuhn, a research assistant with the
Federal Reserve Bank of Cleveland, studied in
japan in 1982.
The views stated herein are those of the author
and not necessarily those of the Federal Reserve
Bank of Cleveland or of the Board of Governors
of the Federal Reserve System.

in the past two decades. With a network
of over 22,400branches, the PSShad
deposits of more than $330 billion in
1983:IIQ, making it the largest recipient
of deposits in the world.'
The PSS
competes directly with commercial banks
for personal deposits, which make up
about 99 percent of its deposit base,
compared with lessthan 40 percent for
commercial banks. An attractive savings
source for Japanese households, the PSS
can provide more favorable rates,
terms, and tax treatment than commercial banks. Consequently, the financial
community is concerned about the
unrestricted expansion of post office
savings, which are viewed as a serious
threat to the commercial banking
industry. This Economic Commentary
discussesJapan's postal savings system,
its characteristics and problems, and its
effect on the Japaneseeconomy.
The Japanese Financial System
In contrast to the U.S. financial
system, the Japanesefinancial market
structure is highly specialized. The
system shows extensive separation of
financial activities, a comparatively high
degree of regulation and control of
private financial institutions by the
monetary authorities, and a much more
active governmental role in financial
2. The deposits of the PSS are about three times
those of the outstanding
accounts of Banque
Nationale de Paris (the world's largest bank in
terms of deposits) and about five times those of
Japan's largest bank. See Gordon F. Boreharn,
"The Financial System: One Reason for Japan's
Success," Canadian Banker and fCB Review, vol.
88, no. 6 (December
1981), pp. 12-17.

Federal Reserve Bank of Cleveland
between government and private financial institutions is escalating in such
fields as shipbuilding and construction
of hotels and cement factories.
The government's choice to rely on
administrative control in the allocation
of resources proved to be extremely
effective during the reconstruction of
the Japaneseeconomy because of the
underdeveloped condition of the capital market. Now, as the capital market
matures, and as economic growth slows
and corporate financial demand declines, the appropriateness of extensive
governmental influence over the flow
of funds is being questioned.

decades, sliding to 39 percent of total
loans outstanding in 1982from 55 percent in 1960.On the other hand, the
lending share of government-related
financial organizations has increased
steadily. The sustained expansion of
loans made by the Trust Fund Bureaufrom 10 percent of the total in 1960to
the current 22.7 percent-has been instrumental in lowering the banking
industry's share of the lending pie.
Since funds garnered in the PSS
are
channeled, via the Trust Fund Bureau,
to governmental lending institutions
and hence to private industry, the more
money post offices absorb and make
available for lending, the steeper the
competition isamong commercial banks.
The private financial sector, in effect,
must compete directly with an institution whose activities are outside the
market economy. Thus, the flow of funds
is being directed, to a significant extent,
by governmental bodies rather than by
the free market; i.e., the tremendous
growth of postal savings deposits has
created a substantial flow of credit from
the private to the public sector, bypassing the market mechanism. A question of
efficiency and equity then arisesconcerning the appropriate allocation of funds
in the nation's economy as a whole.
Major portions of the funds channeled
through government financial institutions via the Treasury Investments and
Loans program went into housing (26.2
percent in FY 1981), small enterprise
promotion (19.6percent), living environment (13.9 percent), and transportation
and communication (10.1 percentj.?
These sectors often find it difficult to
attract capital without paying a premium. Moreover, the social and economic
benefits derived from public intervention may justify the intervention itself.
Intertwined with criticism over the
handling of postal savings is the issue of
the government's "crowding out" the
private sector by encroaching on areas
of private financing. Competition

Implications for Monetary Policy
The PSS
sets interest rates paid on its
own deposits independently of the
monetary authorities. The usual resistance of the MPT to cut interest rates on
postal savings accounts when the BOJ
decides to lower the discount rate
influences the timing of money market
effects desired by the BOJ. When declines of interest rates on postal
deposits lag behind those of private
financial institutions, a shift of funds
to the PSS
often results, reducing the
share of funds made available through
private sources, particularly smaller
banks and thrift institutions. In July 1972
and in May 1977,for example, when
interest-rate declines in PSSaccounts
lagged behind the reductions in private-sector deposits by 15 days, the total
value of postal savings, as a proportion
of all fixed deposits, increased
substantially. For the same reason,
during July-September 1980,the
accounts of the Treasury moved into a
sizable surplus, the counterpart of
which was a record shortage of funds in
the money markets."
The MOF and the BOJ are advocating
unification of the present two-tier
decision making process on interest
rates, claiming that the effective
operation of monetary policy is hin-

5. See "Highlight of FY1981 Budget Treasury
Investments
and loans Program," japan
Economic journal, January 13, 1981, p. 15.

6. "Trends in Personal Savings and Personal
Financial Assets Selection,"
Bank of Japan, Special
Paper #93 (April 1981), pp. 15-16.

dered because such a large source of
funds is outside the scope of their direct
control. The extent to which the PSShas
reduced monetary control in Japan is
not clear, however. Although the PSS
maintains a large share of personal
deposits and the percentage of loans
generated by commercial banks has
steadily declined, the PSS
channels the
vast majority of its funds through
government agencies. Because the MOF
monitors these agencies (loan rates
have to be approved by the MOF), the
overall range of monetary and credit
control has not been diminished by the
shift to postal savings-the composition
has merely changed. If, however, the
PSS
follows through with plans to
expand its own lending capacity
(currently a personal loan of up to
about $2,800per borrower is allowed)
to include housing finance and educational loans, the credit it extends will
be outside the control of the monetary
authorities and could weaken the
effectiveness of monetary policy.
Conclusion
The Japanesegovernment has played
Federal Reserve Bank of Cleveland
Research Department
P.O. Box 6387
Cleveland, OH 44101

an active and important role in financial
intermediation and credit allocation. By
collecting personal savings through the
PSS
and then allocating them to public
institutions, the Japanesegovernment
has structured an effective system that
functions in concert with its industrial
and social policies. Although unsophisticated in terms of free-market fluctuations, this system provided the needed
capital for postwar economic reconstruction. Now, however, the financial
community isconcerned about the power
that the PSShas amassed and the
encroachment of government institutions
in areas of private-sector finance. The
debate centers around the issue of
whether a bureaucracy is better qualified to direct the flow of credit than a
private market. Also debated is how
increased governmental intervention
will affect the efficiency of a freemarket system. Determining the appropriateness of government vs. private
financing is a problem not peculiar to
the Japanesesituation. Indeed,
American policymakers are now raising
similar issuesabout the development of
a national industrial policy.
BULK RATE
U.S. Postage Paid
Cleveland, OH
Permit No, 385

~£QnomicCommentary
The Japanese Postal Savings System:
A State-Run Financial Monster?
by Laura A. Kuhn

apan maintains the highest
personal savings rate of all the
major industrialized countries. In
1982the Japanese personal savings
rate was about 19.3 percent of
disposable income-almost three times
that of the United States.' Many analysts
consider the thrift of the Japanese
people to be the primary reason for
that country's tremendous industrial
growth and technological advancement
after World War II. Through the postal
savings system (PSS),the Japanesegovernment has converted personal savings
deposits into long-term capital for
industrial, trade, infrastructural, and
social development. The state-run PSS
has played a vital role in channeling
assetsto the private sector and in
helping to finance the huge government deficits.
Post office savings have mushroomed
1. For additional
information
on the savings
rate, see Organization
for Economic Cooperation
and Development,
OECD Economic Outlook,
July 1983.
Although the observed frugality in household
savings results from many factors, much can be
explained
by the rapid growth in income and by
institutional
factors, such as the wage payment
system, the underdeveloped
condition
of the
social security system, the limited availability of
consumer
and housing credit, and the tax system.
See Henry C. and Mable I. Wallich, "Banking and
Finance," in Hugh Patrick and Henry Rosovsky,
Eds., Asia's New Giant, Brookings Institution
(Washington:
1976), pp. 249-315.

Address Correction Requested: Pleasesend corrected mailing label to the Federal
ReserveBank of Cleveland, ResearchDepartment, P.O. Box 6387,Cleveland, OH 44101.

September 26, 1983

Laura A. Kuhn, a research assistant with the
Federal Reserve Bank of Cleveland, studied in
japan in 1982.
The views stated herein are those of the author
and not necessarily those of the Federal Reserve
Bank of Cleveland or of the Board of Governors
of the Federal Reserve System.

in the past two decades. With a network
of over 22,400branches, the PSShad
deposits of more than $330 billion in
1983:IIQ, making it the largest recipient
of deposits in the world.'
The PSS
competes directly with commercial banks
for personal deposits, which make up
about 99 percent of its deposit base,
compared with lessthan 40 percent for
commercial banks. An attractive savings
source for Japanese households, the PSS
can provide more favorable rates,
terms, and tax treatment than commercial banks. Consequently, the financial
community is concerned about the
unrestricted expansion of post office
savings, which are viewed as a serious
threat to the commercial banking
industry. This Economic Commentary
discussesJapan's postal savings system,
its characteristics and problems, and its
effect on the Japaneseeconomy.
The Japanese Financial System
In contrast to the U.S. financial
system, the Japanesefinancial market
structure is highly specialized. The
system shows extensive separation of
financial activities, a comparatively high
degree of regulation and control of
private financial institutions by the
monetary authorities, and a much more
active governmental role in financial
2. The deposits of the PSS are about three times
those of the outstanding
accounts of Banque
Nationale de Paris (the world's largest bank in
terms of deposits) and about five times those of
Japan's largest bank. See Gordon F. Boreharn,
"The Financial System: One Reason for Japan's
Success," Canadian Banker and fCB Review, vol.
88, no. 6 (December
1981), pp. 12-17.