The Tokyo financial market is now recognized as one of the largest financial centres in the world. It is significant that the world's five largest commercial banks are all Japanese, although Japan's GNP is only the second largest in the world.

Modern banking in Japan is, however, comparatively new. It was only in the mid-nineteenth century that the Japanese government began to establish a modern banking system through the introduction of advanced systems from Western countries. As a result, Japanese banking has much in common with its US and European counterparts. Roughly speaking, Japanese commercial banks are very similar to those of Britain or Europe, while financial markets are almost identical to US markets. In addition, the Japanese government has introduced a number of unique features. In the last decade, Japan has been trying to reform its financial system in order to cope with internationalization.

Financial institutions in Japn are classified into private sector and public sector institutions, and institutions in each catergory are further divided into depository and non-depository institutions. Private sector depository institutions include commercial banks, foreign banks, long-term credit banks, trust banks and financial institutions for small and medium business, agriculture and fisheries. The commercial banks and long-term credit banks are very active in international operations. Private sector non-depository institutions include firms such as insurance companies, securities firms and finance companies. Public sector institutions include government banks, government finace corporations and the Postal Savings service. Wide-scale deregulation of the banking system in Japan took place in 1993–4.