Japan working group meets.

• Position: Analysis of the impact of banking relationships and of Japanese industrial policy

The NBER's Japan Working Group, directed by Anil K Kashyap, University of Chicago, met in Cambridge on April 19. Members discussed the following papers:

Brian J. Hall and David E. Weinstein, Harvard University, "Do Banking Relationships Reduce Corporate Myopia? Evidence from Japan"

Discussant: David Scharfstein, NBER and MIT

Albert Ando, NBER and University of Pennsylvania, John Hancock, University of Pennsylvania, and Gary Sawchuk, Industry Canada, "Cost of Capital for the United States, Japan, and Canada: An Attempt at Measurement Based on Individual Company Records and Aggregate National Accounts Data" (NBER Working Paper No. 5884)

Discussant: Dale Jorgenson, Harvard University

Lee G. Branstetter, NBER and Dartmouth College, and Mariko Sakakibara, University of California, Los Angeles, "Japanese Research Consortia: A Microeconomic Analysis of Industrial Policy" (See "Program Meeting on Productivity" earlier in this issue for a description of this paper.)

Discussant: Sara Ellison, MIT

Takatoshi Ito, NBER and Hitotsubashi University, Richard K. Lyons, NBER and University of California, Berkeley, and Michael T. Melvin, Arizona State University, "Is there Private Information in the FX Market? The Tokyo Experiment" (NBER Working Paper No. 5936)

Discussant: Silverio Foresi, New York University

Kenn Ariga, Kyoto University; Yasushi Ohkusa, Osaka City University; and Giorgio Brunello, Udine University, "Fast Track: Is it in the Genes? The Promotion Policy of a Large Japanese Firm"

Discussant: Canice Prendergast, NBER and University of Chicago

Hall and Weinstein compare Japanese firms with and without strong relationships to banks to determine whether strong banking relationships enable firms to behave less myopically. They conjecture that if banking relationships do reduce corporate myopia, this benefit will be most pronounced during episodes of financial distress, when concerns about the current bottom line are most pronounced. Using R and D as a proxy for long-term investment, they find no evidence that unaffiliated Japanese firms cut back on R and D more than firms with strong banking relationships during periods of financial distress. Nor do firms with strong banking relationships receive more loan assistance during periods of financial distress. This casts doubt on the main mechanism through which bank relationships are thought to reduce financial-friction induced myopia.

Ando, Hancock, and Sawchuk lay out a conceptual basis for measuring...