The purpose of this paper is to examine the impact of a 1993 relaxation of the restrictions governing the underwriting operations of Japanese banks on bond issues in the Euro-yen and Japanese corporate bond markets. Evidence is presented to suggest that the relaxation of the restrictions governing the underwriting operations of Japanese banks was associated with a significant fall in spreads in both the Euro-yen and Japanese corporate bond markets. (c) 2005 IMACS. Published by Elsevier B.V. All rights reserved.