Analysis Of Problems Of Financial Crisis--Causes Of Japanese Financial Crisis

This paper, titled Analysis of Problems of Financial Crisis---Causes of Japanese Financial Crisis, is the doctoral graduation thesis of the author who majors in quantitative economics in the Business School of JiLin University, completed under the arduous direction of the supervisor, President Zhang Yishan of the Business School.Reading a great number of references, the author finds that most western scholars explain the realization and solution of the financial crisis by thinking that credit shrinkage results in business recession in the study of the financial crisis, that is, acquiescing in taking the financial media with inadequate capital as prerequisite. However, the actual situation of Japan is not the case. The extremely high savings ratio in Japan makes its banks have a large amount of capital used for investment, but it is in such a financial system with rich capital that the crisis occurs unexpectedly. It can be seen that under the prerequisite of dissatisfying the western theories of financial crisis, these theories cannot correctly understand and resolve the occurrence of Japanese financial crisis and various subsequent unhealthy tendencies.Starting from the special financial phenomenon of Japan, this paper makes an in-depth analysis of and research on the relevant problems of financial crisis, involving the theory of financial media taking incomplete capital market as the prerequisite, impact of system risk on capital composition, relations between price of assets and financial crisis, relations between prosperity of real estate and financial crisis and the problem of bad debts as well as the problem of oversize of banks and economic growth, explained as follows respectively: 1. The theory of financial media based on the incomplete market is introduced and the relevant theories of financial media agencies are dealt with in a systematic way, mainly including the first-best optimal contract model, Diamond's theory of financial media, credit rationing theory of Stiglitz and Weiss and economic analysis of over-investment as well as bank income and abandonment of creditor's rights. The following argumentations are provided with theoretic basis while these theories of micro-financial analysis are introduced and their disadvantages are pointed out. 2. With the intensifying of competition between banks, corrosion of living environment and bankruptcy of a great number of banks, how to deal with the system risks which cannot disperse risks such as real estate price changing risk and interest rate changing risk, etc. have become the key point of the Japanese government dealing with the financial crisis. Although there have been various analyses and explanations of the financial media with 100% stock and the financial media 100% in debt in the theories of financial media of information economics, the relations between the optimal capital composition and risk dispersion are not completely expounded. Therefore, the author focuses on the improvement of the deficiencies in the CSV model, and discusses that how a large-scale bank chooses combination of stock and capital in debt when facing the system risks with risks which cannot dispersed: relative to Diamond and Williamson's theory of financial media 100% in debt (savings) with credit risk completely dispersed, the financial media agency tends to issue stocks in order to decrease the bankrupt cost itself when it cannot disperse risks. If the financial media can reach a balance between decreasing the bankrupt cost by issuing stocks and the debt shown in the CSV model specialties, the optimal capital structure can be realized. It is pointed out that the condition of composition of the optimal contract is the shareholder supervising and controlling the financial media "in advance". 3. In accordance to the phenomenon of slump of the price of assets in Japanese financial crisis, the theoretic mechanism causing financial crisis is explored. The relation that the market of assets and the economic system depend on each other is first defi...