I examine the role of foreign banks in Japan to begin to address the issue of whether the Japanese authorities are pursuing mercantilist policies in trade in financial services. The paper begins with an historical overview of foreign bank entry since the opening of Japan in 1859. Next, I examine which banks are in Japan, evidence on economies of scale, and the foreign banks' balance sheets. Then I discuss the nature of foreign direct investment (FDI) in banking and the issue of the degree of foreign bank penetration.
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.