The main elements of Japan's financial system are much the same as those of other major industrialized nations: a commercial banking system, which accepts deposits, extends loans to businesses, and deals in foreign exchange; specialized government-owned financial institutions, which fund various sectors of the domestic economy; securities companies, which provide brokerage services, underwrite corporate and government securities, and deal in securities markets; capital markets, which offer the means to finance public and private debt and to sell residual corporate ownership; and money markets, which offer banks a source of liquidity and provide the Bank of Japan with a tool to implement monetary policy.
The investment houses also increased overseas activities, especially participating in the United States Treasury bond market (where as much as 25 to 30% of each new issue was purchased by Japanese investors in the late 1980s).
The Big Four played a key role in international financial transactions and were members of the New York Stock Exchange.
Nomura was the world's largest single securities firm; its net capital, in excess of US$10 billion in 1986, exceeded that of Merrill Lynch, Salomon Brothers, and Shearson Lehman combined.
Japan's securities firms derived most of their income from brokerage fees, equity and bond trading, underwriting, and dealing.
In the late 1980s, a number of foreign securities firms, including Salomon Brothers and Merrill Lynch, became players in Japan's financial world.
Of the 1,848 publicly traded domestic companies in Japan at the end of 1986, about 80% were listed on the Tokyo Securities and Stock Exchange.
Traditionally large firms obtained funding through bank loans rather than capital markets, but in the late 1980s they began to rely more on direct financing.
In 1990, five types of securities were traded on the Tokyo exchange: stocks, bonds, investment trusts, rights, and warrants alone.
The trading recorded by the Nikkei 225 stock average, compiled by the Nihon Keizai Shimbun (Japan Economic Daily), grew from 6,850 in October 1982 to nearly 39,000 in early 1990.
During one six-month period in 1986, total trade volume on the Tokyo exchange increased by 250% with wild swings in the Nikkei.
After the plunge of the New York Stock Exchange in October 1987, the Tokyo average dropped by 15%, but there was a sharp recovery by early 1988.