Back in May of 1990, the Bank of Japan created a new department responsible for financial stability and I was chosen as a division chief. Then Governor Mieno gave my boss and myself a mandate to spell out policy prescriptions so that the Bank of Japan can prepare itself for possible failures of financial institutions.
At that time, Japan’s economy was still in the booming mood. Although the stock market had peaked out already, property valuations still continued to rise. Looking back, I cannot help but think that the Governor was very prescient because it was a few years later that the initial signs of financial instability came to the surface.