Since the beginning of the 1990s, the Japanese banking sector has been facing serious problems. The main reason for this is the poor quality of assets and the continually weakening capital position of the banks. No solution has been found so far to the problems with which the Japanese banks have been confronted over the last ten years; consequently the crisis has gradually spread to other sectors of the country's economy. The situation seems unmanageable - the poor financial condition of banks weakens the economic activities of companies, but the improvement of the situation of banks and their ability to overcome the crisis depends on an economic revival.

The study presents some of the characteristic features of Japan's economy and financial system as well as economic and regulatory actions which have been undertaken in the past and which may have been at the root of the crisis. The article also describes actions taken by the Japanese central bank and by other financial institutions in the face of the numerous bankruptcies of major institutions as well as the development of a safety network in the banking system in reaction to the worsening economic situation and the subsequent deepening of the banking crisis.

Japanese experience concerning the management of a long-term banking crisis, such as changes in legislation, new institutional regulations and various interventional actions undertaken by the central bank, are presented in the paper in detail. Growing concern for the financial stability and security of the Japanese banking sector has also been reflected in the decisions made by the country's government, which are aimed to reduce bad debt at Japanese banks and to stimulate an economic revival.