Abstract EN:

The long Japanese recession is considered under a perspective of liquidity and bankruptcy. Instead of pushing insolvent banks into bankruptcy, authorities tried to deal with this liability problem by guarantying macroeconomic liquidity, and on the micro level, through modernization of microstructure credit activity in order to provide more dynamic market liquidity and decrease the cost of corporate reorganization procedures, thus encouraging their use instead of the informal main bank system. They also attempted to substitute transparency rules in place of weak solvency standards, in order to reduce moral hazard and to make their commitment to gradual prudential tightening more creditable. As liquidity can’t exist without discipline of payment, this strategy resulted in long standing deflation, huge public debt, and incomplete banking system stabilisation. The Great Depression is used to illustrate Japan’s situation and to focus attention on the links that exist between liquidity and bankruptcy at the macro, banking policy, and corporate reorganization levels.