The burst of Japan’s massive financial bubble in 1990 caused the value of stocks, land and other assets to plummet. Japanese banks had financed their asset purchases using them as collateral. Many banks failed due to a combination of the collapse of asset values and their clients’ inability to pay back loans. Japanese manufacturers lost their traditional source of financing, bank loans. Shrunken product demand and persistent excess capacity caused deflation, which became endemic in Japan. Japan’s traditional bank-centered corporate governance system was blamed for the nation’s economic bust. The beginning of 21st century marked a notable period of corporate governance reforms in Japan away from bank-centered governance and toward marketoriented governance. Mutual or cross shareholdings among Japanese firms and financial institutions decreased rapidly, while shareholdings by foreign institutions increased for high-performing Japanese firms.