Chapter 1
The Financial Crisis and Realignment of the Financial Sector

1. The financial crisis in Japan

In Japan, the business climate in general, and especially for the financial sector, became challenging starting around 1990 due to a series of unfavorable events. The stock market crash began in January 1990, followed by the collapse of the bubble economy. The total volume control for real estate loans was introduced in April of the same year. Eventually, the business cycle peaked in February 1991. Downward spirals of land and stock prices delivered a heavy blow to quite a few companies that had borrowed heavily to invest in real estate and stocks, throwing them into financial turmoil. This resulted in non-performing loans, particularly those related to real estate, piling up and being written off by lending institutions. Among those, a number of remarkably large financial institutions went bankrupt in and after 1997, which created financial instability.