Has the Credit Crunch Occurred in Japan in 1990s?

The purpose of this paper is to elucidate whether the supply side played a crucial role in causing credit crunch in 1990s. To this end, we estimated the supply and demand functions using prefectural panel data from 1990 to 2001, and calculate the shift of those functions. The results reveal that until 1996, the supply function largely shifted toward right, indicating that the supply side was not the main cause. However, after 1996 the loan supply shifted leftwards as much as the loan demand, implying that the contraction of supply contributed to the decrease in the loans.