How to save Japan's banks

Article Abstract:

There has been a ritual pattern to announcements of rescue plans for Japanese banks, and each announcement has been ultimately followed by doubts. The banks and stockholders have to acknowledge the need for losses to tackle the real state of banks, balance sheets. Banks should undergo a compulsory recapitalization and nationalization would mean that stockholders would have to take losses. Some bank borrowers would have to restructure and may go bankrupt, but such a painful solution is necessary to revive the system and the Japanese economy.

Editorial, Economic policy

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The plot thins

Article Abstract:

Japanese land prices have dropped for six successive years since a peak in 1992, and this affects bank loans using land as collateral. Banks have not taken into account the full drop in land values, and this means that their loan provisions should be increased. Banks are less willing to roll over loans for real estate and construction companies. Banks may receive warnings from the Financial Supervisory Agency if their accounts show cause for concern, so banks have an incentive to recognise losses rather than roll over loans.

Construction, Real Estate, Real Estate and Rental and Leasing, Construction industry, Real estate industry

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Hard bargains

Article Abstract:

The Japanese government has nationalized Long-Term Credit Bank (LTCB), and may do the same with a number of other banks. The problem will then be how to sell them. Interest has been shown in LTCB by potential buyers who would restructure the bank, which may involve asset stripping. The government is not keen on this approach. Other banks for sale include Nippon Credit Bank and Tokyo Sowa. There may be a contraction in the Japanese banking industry, and only taxpayers are investing large sums in Japanese banks.

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