Comparison Of The Policy Effects Of Macro-prudential Supervision Between China And Japan

Global financial crisis in 2008 have brought tremendous regression for the global economic. Before the financial crisis, commercial banks were full of confidence to the economic situation and the ability of borrowers. The banks reduced the requirements of loan and accumulated a large amount of risk in pursuit of profit. After the crisis, the commercial banks rapidly tightened credit and caused the further spread of crisis. This pro-cyclical credit is one of the vital reasons behind the formation of crisis. And the effects sparked heated discussion between academia and regulatory agencies. After the credit crisis, all countries think highly of macro-prudential supervision never before.In China and Japan, the financial systems are both bank-dominated. The current economy in China and Japan are still heavily dependent on bank credit financing. So credit risk is the main source of systematic risk and the main attention of macro-prudential supervision. If the policy of macro-prudential supervision retrains the systematic risk effectively, the counter-cycle effect of credit will be weakened. Therefore, the thesis verifies the effectiveness of the policy of macro-prudential supervision with credit pro-cyclicality.On the theoretical basis of the credit pro-cyclicality and macro-prudential supervision, this thesis analyzes the limitations of monetary policy and micro-prudential supervision in credit regulations. After that, this thesis proved the effect of macro-prudential supervision on credit cycle from three transmission mechanisms, which are capital macro-prudential policy tools, liquidity macro-prudential policy tools and asset macro-prudential policy tools. It provides the theoretical basis for verifying the effectiveness of the policy of macro-prudential supervision based on credit regulation.Secondly, the thesis introduces the general situations of macro-prudential supervision in China and Japan. The introduction come from the three aspects, which are organization structure, the law and the policy instructions. In contrast, the macro-prudential regulatory framework of Japan is more mature and perfect.Then, This thesis makes an empirical test. After comparing the merits and demerits of various methods, this thesis selects the H-P filtering and the C-F filtering from the trend-cycle decomposition method to identify cycle and the Pearson correlation coefficient and VAR model to measure the correlation degree between economic cycle and credit cycle.Finally, this thesis this thesis compares the empirical results of China with Japan and puts forward the policy recommendations. According to the results, from 1992 to 2002 period, Japan’s credit is pro-cyclical, while from 2002 to 2015 it is counter-cyclical. However, during the whole period China’s credit is pro-cyclical. Although, both countries financial systems are bank-dominated. But the empirical results show that the effect of credit regulation is different. From the side, which also reflects that Japan’s financial reform and Macro-prudential supervision have achieved a remarkable effect. The practice in Japan provides reference to the establishing the framework of macro-prudential supervision with Chinese characteristics. It’s meaningful and arduous to establish the framework of macro-prudential supervision, which with wide coverage, clear responsibilities and smooth coordination. We can take this matter from the following three aspects:Firstly, strengthening the information-sharing and policy coordination of regulatory; Secondly, dealing with the hidden trouble of the systematic financial risk; Thirdly, improving the mechanism for crisis management and market withdrawing.