1. City Banks (12 commercial banks of the large cities)

City banks collect savings and use it to provide medium-term financing for business, industry and agriculture. These banks dominate business finance because they provide three-month loans that leave businss financially vulnerable. City banks are not permitted to manage trusts or pension funds.

The city banks were established after the Meiji Restoration. Dai-Ichi Kangyo, the world's largest bank with assets of $241 billion in the late 1980s, was established in 1872 as Dai-Ichi Kokuristu (First National Bank). Most of the other city banks were created by zaibatsu; e.g. Mitsui Bank (1876), Fuji Bank (1880), Mitsubishi Bank (1880) and Sumitomo Bank (1895).

2. Regional Banks (63 local banks)

About two thirds of the lending of these banks is done within the prefecture (state) in which they are located.

3. Savings and Loan Institutions (71)

These lend primarily to small retail, wholesale and construction firms.

4. Industrial Banks (3)

The Industrial Bank of Japan was created by the Meiji government in 1902 to provide long term financing to heavy industry. It raised its funds by selling five-year debentures. After World War II it became a private bank. Two competiting banks were created at that time, the Long Term Credit Bank of Japan and the Nippon Credit Bank.

5. Trust Banks (7)

It is only trust banks that are permitted to manage trusts, pension funds and such. Trust banks raise about half of their funds by selling two to five year trust certificates. The rest comes from depositors and the income from managing trusts. The biggest trust banks are Mitsubishi Trust & Banking and Sumitomo Trust & Banking. Both had assets of substantially more than $200 billion in the late 1980s.

6. Postal Savings Bureau

This is a savings bank operated by the postal service through its 23,000 post offices. In the late 1980s it had more than $500 billion in deposits and was the world's largest savings institution.

7. Norinchukin Bank

This is the bank owned by farm and fishery cooperatives employees. It is a major supplier of funds to city banks.

8. The Bank of Japan

The central bank of Japan was established in 1882 to control the money supply and to be the lender of last resort to the banking system. It controls the money supply primarily through its control of the discount rate, the interest rate for loans from the Bank of Japan to banks. The government owns 55 percent of the Bank of Japan and the private investors own the rest. There is an uneasy relationship between the Bank of Japan and the Ministry of Finance.

9. Bank of Tokyo

In 1880 the Meiji government granted a monopoly for foreign exchange and trade financing to the Yokohama Specie Bank. The government supplied one third of its capital and gave it a special relationship with the central bank, the Bank of Japan. Later the name was changed to the Bank of Tokyo.

10. Insurance Companies

Japan has the world's largest life insurance market because Japanese buy significantly more life insurance per person than Americans do. Life insurance companies are prohibited from providing non-life insurance such as fire and marine. Insurance companies in these are fields are not allowed to provide life insurance.

11. Security Firms

The Big Four security firms in the late 1980's were Nomura, Daiwa, Nikko and Yamaichi. The market values of these firms were greater than most banks. Nomura had a market value greater than any bank. Their valuations were significantly larger in valuation than American security firms such as Merrill Lynch. The security firm of Yamaichi collapsed in November of 1997 and filed for bankruptcy in June of 1999. In 1998 Nikko Securities was acquired by Citigroup and subsequently became part of Nikko Salomon Smith Barney.

12. The Ministry of Finance

This is the most powerful agency in the Japanese government. It combines the powers held in the U.S. government held by the Treasury Department, the Federal Reserve, the Internal Revenue Service, the Securities and Exchange Commission and the Department of Commerce. In addition it drafts the national budget for the legislature to approve.