Perils of growth before prudence

Article Abstract:

The Japanese banking industry's over-quick growth has resulted in a financial crisis. The Ministry of Finance (MOF) reports that 21 of Japan's largest banks had US$100 billion of non-performing loans in end-Sep 1992, and bad debts could account for 5% of their total assets by the end of the financial year. Though a fall in interest rates generated business profits, 60% of city banks and credit banks' earnings still went into debt provisions. 30 banks are setting up an agency to buy problem loans from other banks, and expect tax credits from the MOF. Bank mergers and sales may also take place.

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Private banks face uphill task

Article Abstract:

Private banking and financial services in Japan have experienced difficulties in getting clients even when the Japanese economywas at its peak. Furthermore, these difficulties are compounded when the Japanese economy has somewhat collapsed. The aversion to private banking services among individuals and corporations in Japan can be attributed to theirtradition in investing in non-liquefied assets. Majority hold their savings in the form of stocks, real estate or offshore investments.

Analysis

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