If we revisit the discussions based on the experience of the recent crisis, it can be summarized as follows. First, the complementarity of functioning between banks and capital market is important. While the functioning of corporate bond and CP markets declined significantly in Japan during the crisis, bank lending substituted the financial intermediation function during such phase and underpinned the rapidly deteriorating firms’ funding.
Subsequently, when the functioning of the capital market was restored, bank lending started to decline. Therefore, it became clear again that the existence of multiple financial intermediation channels is important for the availability of firms’ funding and the robustness of the financial system.