Keidanren calls for Japan state bank ownership

Brad Mayer bradley.mayer at ebay.sun.com
Fri May 25 13:44:57 PDT 2001


For private profit, of course...this is better called bureaucratic ownership of capitalist banks (state capitalist), especially as it is implemented via share ownership, rather than "nationalization" with its implication of actual mass public participation in ownership and management. And the debt figures are notoriously understated. $100 B by 2004? Try maybe $400 B. And the bad loan trendline continues upward. From today's FT: ------------------------------------------------------------------------------------------- Tokyo may nationalise banks

By Gillian Tett and David Ibison in Tokyo - May 24 2001 18:13:41

The Japanese government may need to nationalise "one or two" large banks to allay market unease about the financial sector, one of the country's most influential business leaders has warned.

In particular, the government could convert the preferential shares that it holds in large banks into ordinary shares to gain control over weak banks, said Takashi Imai, chairman of the Keidanren, the powerful Japanese business federation.

"There is a possibility that one or two banks may need to be nationalised... this could help market sentiment, which is why I am suggesting it," he said.

The government bought ¥7,450bn ($60bn) of preferential shares in large banks in 1999 to expand their capital base and holds particularly large stakes in the weaker banks, such as Daiwa and Chuo-Mitsui.

Pressure is mounting on the new government of Junichiro Koizumi to take action over the banks' bad loans. The scale of this problem was highlighted on Thursday after two of the four large banking groups, Mitsubishi Tokyo Financial and Sumitomo Mitsui, reported results for last year, which indicated that bad loans were increasing.

Mitsubishi Tokyo incurred costs of ¥800bn dealing with bad loans. Despite these efforts, the level of bad and potentially troubled loans rose 55 per cent for the year to ¥4,460bn.

Sumitomo Mitsui incurred costs of ¥819bn either in writing off or providing for bad and potentially troubled loans - which remained at ¥2,820bn, in spite of these write-offs.

The previous government has already demanded that the large banks remove ¥12,000bn of clearly bad loans before 2004. However, banking analysts fear that this target is far too modest, since many of the "potentially troubled" loans are also turning sour.

The banks have also been criticised for using "soft" measures to tackle their bad loans, such as extending loan forgiveness to weak companies rather than forcing them to go bankrupt.

Mr Imai on Thursday argued that banks must force more borrowers into bankruptcy. "There are many weak companies that should have exited the market long ago. . . particularly in sectors such as construction, retailing and small companies. The elimination of banks' bad loans is meaningless unless there is a reduction in the number of borrowing companies and elimination of excess capacity."

He admitted that more bankruptcies could temporarily hurt the economy and expected Japan to post no growth in the year to March 2002. The government predicts 1.7 per cent growth.

However, he insisted that Japan had to press ahead with structural reform and said this would accelerate after the unexpected selection of Mr Koizumi as prime minister last month.



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