DEPOSIT GUARANTEES AND THE BURST OF THE JAPANESE BUBBLE ECONOMY

This paper examines the current status of deposit guarantees in Japan and how they have functioned during the burst of the bubble economy in the first half of the 1990s. During this period, the Ministry of Fina nce has had to depart from its ''no failure'' policy and declare depos itory institutions insolvent. The resources of Japan's most important deposit insurance agency-the Deposit Insurance Corporation-were exhaus ted as of late 1995. The other deposit insurance agency for small spec ialized depositories also is technically insolvent. Many of the proble ms that Japan's deposit guarantee system experienced are similar to th ose experienced in the United States during the 1980s.