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| History |
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| Status of the Securities Market Lower than That of Banks |
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The securities industry was placed in an odd position within the financial sector for a long time. Japan's economic recovery after World War II was conducted through indirect financing via banks. The government kept deposit interest rates low through its low-interest rate policy, and the low-interest funds collected were loaned out to industries through banks. This kind of policy in which a government regulates interest rates does not fit in with a market economy where prices are determined through price mechanisms.
In stock and securities markets, prices are fundamentally determined through supply and demand and speculation by investors. It can be said that under normal conditions, the utilization of market functions brings about the best economic efficiency and is also desirable in terms of asset allocation. However, it can also be said that in consideration of the shortage of funds in Japan after World War II, focusing limited funds to industries, and furthermore, providing them at a low cost in a type of fund allotment policy, was more effective than direct financing made through stock markets and capital markets. |
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The former building of Tokyo Stock Exchange (used from 1931 to 1982) |
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| In a normal situation, companies boost capitalization or issue corporate bonds in order to secure long-term capital investment funds, etc. However, under the Japanese financial system, long-term funds were provided by banks, particularly through long-term credit banks and trust banks. Commercial banks also, in actuality, supplied long-term funds through rollovers of short-term loans. Under this kind of a system, the stock market and bond market were a peripheral market. In other words, they were only a supplementary financial market. This was what determined the characteristic of postwar Japanese securities companies. |
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| Stocks Account for Only a Small Proportion of Individual Assets |
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For many years, the biggest resource for the distribution of assets in Japan was bank deposits; not stocks or investment trusts. Equity holding by individuals remained at an extremely low level. Although there were times when the amount of shares held by individuals increased during several stock booms, shareholding never became a mainstream form of asset management in Japan. Securities companies made an effort to increase the number of individual investors by conducting movements to popularize shareholding, but they were not very productive. There was a strongly rooted feeling among individual investors that investing in stocks was a gamble. Furthermore, one of the aspects of the adverse effects caused by the oligopolization of the stock market was that it distanced individual investors from stock investment.
There was an oligopolistic framework of four securities companies established in Japan's post-war securities industry. The four companies were: Nomura Securities, Daiwa Securities, Nikko Securities and Yamaichi Securities Co., Ltd. These four companies virtually monopolized the securities market, not only in the handling of trading on the stock market but also in the underwriting of stocks and corporate bonds. The four companies had a strong influence on stock pricing, and at times there were even actions such as those that could be taken as stock manipulation. Japan was very much behind in the democratization of the stock market, and even investment trusts were substantially controlled by securities companies. Stocks could not necessarily be said at the time to be a high-quality investment product for individual investors. |
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