As you will surely recall, by 1990 the world’s ten largest banking corporations were headquartered in Japan, and Japanese branches and subsidiaries accounted for almost 20% of all commercial and industrial loans to borrowers located in the US. 20 This expansion is rivalled in magnitude only by the rapid decline of Japanese banking overseas during the 1990s.
A crucial question in this respect is: to what degree was this worldwide expansion of finance, preceding the recent crisis, driven by fundamentals? Part of this process was most certainly associated with the growing global imbalances, fuelled by fast growth and a rapid accumulation of savings in emerging markets, like China.