In Japan, as a result of prolonged high growth in the past, corporate finance has become extremely dependent on bank borrowing. In fact, it has come to a point where borrowers hardly make any distinction between funds for risk-taking and those for running operations. This is directly related to a distortion of corporate governance.
And, I think debt overhang can be considered as an extension of this problem. 2  BIS Review 34/2003  Furthermore, productivity-related wages and a flexible labor market are essential elements for the future of Japan’s economy. It will be quite a challenge to balance these with the traditional system of seniority-based wages and lifetime employment. Needless to say, we must expand business opportunities.