Abstract We examine the movement of retired top staff members (so-called “old boys” or the mechanism of “descending from heaven” [ amakudari]) from the Japanese Ministry of Finance (MoF) and the Bank of Japan (BoJ) into the boards of Japanese private banks. We distinguish between three alternative hypotheses: amakudari as a reward system only for the government bureaucracy, an instrument of prudential policy (ex-post monitoring), and a tool for banks to buy influence from the monetary authorities. The article demonstrates that the system is not solely used for retirement purposes. That is, we get evidence that the inflow of retirees is related to the performance of individual banks, which supports the view that amakudari is not only used as a reward system for retired government bureaucrats. We find a negative relation from changes in profitability to the inflow of retired MoF and BoJ staff members. This is in line with the hypotheses that amakudari is being used as an instrument of prudential policy and for purposes of buying influence. We also find that amakudari appointments have a positive impact on future profitability and lending to risky industries. Hence, it can be asserted that amakudari appointments are not used for monitoring purposes. We conclude that troubled banks buy influence from the monetary authorities to increase their risky lending. Thus, the old boys network involving retired staff members from the MoF and BoJ on the boards of private banks had detrimental effects on prudential policy in Japan. J. Japan. Int. Econ., March 2002, 16(1) pp. 1–30. De Nederlandsche Bank, Amsterdam. The Netherlands, and Department of Social and Institutional Economics, Utrecht University, P.O. Box 80140, 3508 TC Utrecht, The Netherlands. © 2002 Elsevier Science (USA). Journal of Economic Literature Classification Numbers: G30, G38, E58.