Makoto Kasuya

Published August 2007

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Issues of bonds increased in inter-war Japan, the main investors in bonds being banks because demand for loans declined in this period. Banks that were more tolerant of risks (that is, whose capital ratio was higher) made a larger amount of loans, which were riskier than bonds. While national bonds were traded actively in secondary markets, local bonds, corporate bonds, and bank debentures were not traded actively during this period. After the formation of cartels of banks and securities firms for bond underwriting and trading during the Great Depression, bond trading in secondary markets diminished, except for national bonds.