Japanese banks tumble again

Reviewed By Hitoshi URABE

Article:
"Japanese banks tumble again"
http://asia.cnn.com/2002/BUSINESS/asia/10/06/japan.banks/index.html
CNN

Comments:

The article is a report prepared during the lunch break of Japan's stock market on Monday, when a quick glance showed the shares of banks were the most severely attacked.

As the session went on through Monday afternoon, the market dropped even further. The Nikkei average closed at 8,688 yen, 339.55 yen lower than Friday's close, renewing the record low again since the collapse of the bubble of Japan's economy and bringing down the levels to that of June 1983, almost two decades ago. And it was not only the bank shares, either. More than 90% of the stocks listed on the Tokyo Stock Exchange ended lower than the previous trading day.

It all started after the reshuffle of his cabinet by the Prime Minister Koizumi on September 30, when the Financial Services Minister Mr. Yanagisawa was sacked and replaced by Mr. Takenaka, who retained the job of the Economics Minster, effectively making him the most powerful figure in the field of economic policy planning and financial restructuring.

Mr. Takenaka had often explained that his policy was to inject public money into the impaired banking system in order to quickly recover the strength of the financial sector. This, of course, is a natural and sound way of thinking if it were in an ordinary period. But as the situation being it is, it induced fear rather than confidence among people. People became nervous to the measures that are to be adopted during the course of financial sector revitalization, that along the way, unhealthy loans extended by the banks will inevitably be retrieved, for the companies to be left to cease to exist.

The concern grew to almost a panic when Takeshi Kimura, president of KPMG Financial Inc., was invited into the special project team newly established to tackle the bad loan issue. Mr. Kimura, a former Bank of Japan officer and dubbed as a hawk on financial reform, has been one of the strongest critics of the government's approach toward the financial sector reform. He had once argued publicly with Mr. Mori, the former chief of Financial Services Agency. Mr. Kimura has always insisted that public money is needed to clean up the financial sector, and that the fix is necessary to be carried out with speed and determination. It is reported also that Mr. Kimura has long been acquainted with Mr. Takenaka, which is perceived as a sign that the process of the banking reform will in fact be expedited.

A healthy financial sector is undoubtedly vital for Japan's economy to recover. There is, however, a worry amongst people that haste in the attempt to cure the banks could actually be detrimental to the very survival of many companies, and jobs. The recent downspin of the stock market needs to be recognized as an indication and warning that such a fear indeed exists in people's minds. It would thus be necessary for the government to establish and execute a delicately balanced formula, fully coping with this sensitiveness of the issue.