Role and Challenges of Securitization

Author Name YANAGAWA Noriyuki  (Faculty Fellow, RIETI / Associate Professor, Graduate School of Economics, The University of Tokyo)
Creation Date/NO. September 2005 05-J-029
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In Japan, people often point to the importance of market-oriented indirect finance, and securitization is regarded as one of the most promising schemes for its promotion. Yet, it is difficult to say that the significance and challenges of securitization have been sufficiently discussed. This paper expounds on the basic mechanism and merits of securitization as well as on its impact on the financial system. Meanwhile, securitization also has its negative side. Major problems include the asymmetry of information about assets to be sold and the presence of certain legal risks. The paper expounds on the key points of these problems and discusses relevant policy issues.