Herd Behavior in the Japanese Loan Market: Evidence from Semi-Macro Data

The aim of this paper is to examine whether herd behavior exists or not between di®erent types of Japanese banks. Using data of loans outstanding by types of banks from 1980 to 2000, we investigate statistical causality between loans from di®erent types of banks in Japan. Time-series analysis manifested the causality from city banks to regional banks, from long-term credit banks to city banks, and from trust banks to city banks. Consistent with historical events in Japan, these relationships have been found especially for loans to emerging industries and for those in the 1980s. We also conducted analysis to clarify possible causes of the detected herding. Among di®erent stories behind herd behavior, the results are most consistent with that based on inference from other type of banks. The results between long-term credit banks and city banks, and those between trust banks and city banks are also consistent with the "Cowbell-like" e®ect.