Representative Arguments on the Formation of Bubbles : Pigeonholing the Points at Issue - The Period of Bubbles (1) -

The aim of this paper is to compare and examine the following three books focusing our attention on the process of the formation of bubbles: Giichi Miyazaki, The Compound Depression, 1992: Yukio Noguchi, Economics of Bubbles, 1992: Yoshio Suzuki, Monetary Policy in Japan, 1993. Miyazaki deems the first phase of bubble formation to be 1983-87 and the second to be 1988-89. His subjective intention is to explain bubbles through deregulation of finance. Yet objectively, his analysis emphasizes firstly, the Bank's intervention (increase of money supply) after the Plaza agreement, and secondly, MOF's preferential treatments on taxation to firms. His biggest problem is the ambiguity in his basis of the above phase-division, which affects his wlole discussion. Noguchi regards the latter half of 1980's as the bubble period. He points out, first of all, the prosperity of so-called equity finance and zaiteku (technology of finance) as formative factors. Secondly, above all, he refers to the prolonged cheap money. Nevertheless he isn't successful in explaining why bubbles began to swell from the year 1986. Suzuki deems the years 1988-89 to be the bubble period. He argues that it is the long-maintainded cheap money policy, which later proved to be an over-reaction to the Black Monday in Oct. 1987, that brought about bubbles. His arguments are clear, but seem to part from the reality. He excludes the years 1986-87 from the bubble period, as to neglect the extravagant inflow of short-term foreign money and the Bank's intervention above. To conclude, it is very important to clarify to the utmost extent when bubbles began to swell. This prescribes one's analysis of bubbles. We regard 1983-85 as the early phase of formation and 1986-89 as that of fuller-scale. Furthermore the possibility of watered fundamentals as well as the exorbitant short-term capital inflow during 1986-87 (and its relation to bubbles) should not be overlooked.

論説 (Article)