Furthermore, deregulation of the traditional segmentation of business areas and banking organization proceeded only gradually, thus making it difficult for banks to develop businesses that might open up new opportunities for profits. The result was excessive risk taking in lending which was their traditional business. Furthermore, financial institutions can temporarily prevent a fundamental deterioration in profitability from surfacing through aggressive lending.
This kind of behavior and a rapid rise in asset prices during the emergence of the bubble that accelerated credit expansion, worked together to amplify the excess in the business cycle. During the bursting of the bubble in the 1990s, Japanese banks simultaneously faced two problems: the non-performing asset problem and a further rise in pressure stemming from global competition.