Preference formation, negotiations and implementation: Japan and the Basle Capital Accord.

The aim of this thesis is to elucidate the position of Japanese bank regulators in the international harmonising process of the capital standards set by the Basle Committee on Banking Supervision and in the domestic politics of banking regulation. An attempt is made to test a two-level-game model that positions Japanese regulators as the link between international and domestic politics. The thesis systematically assesses the strengths and the weaknesses of the two-level approach, and considers the validity of alternatives-systemic- and domestic-level approaches. The selection of case studies is made on such a basis: the case of negotiation processes and that of implementation. On the one hand, a close look at Japanese regulators' preference formation and behaviour through a filter of the two-level-game framework allows us to better understand their behaviour at the negotiation process. The thesis presents a counterexample to mainstream systemic-level explanations about the forces leading to the Japanese Ministry of Finance's negotiating position. The MoF was tactically motivated to use the internationally agreed rules and norms to legitimise its domestic policies and to shore up its position in the domestic politics. On the other hand, the thesis points out limits to the logic of two-level-game approach concerning implementation and compliance issues. The hypotheses derived from the logic of two-level-game approach do not sufficiently explain ineffectual Japanese compliance with the Basle Accord. Both domestic institutional "capacity" and the "willingness" of regulators are important in determining the degree of compliance. These institutional and intentional factors underline the possibility that the Basle rules can be sabotaged by vested interests at the implementation phase. With regard to implementation issues, therefore, more persuasive explanations come from the domestic-based argument that dysfunctional domestic institutions hampered Japanese credible commitments to the Basle Accord