Thursday, June 18, 2009

Japan banks: "zombie" banks? Not any more

Japan endured an economic and financial malaise in the 1990s known as the "lost decade" after a real estate bubble, built on excessive lending, burst. Insolvent lenders propped up by government bailouts became known as "zombie" banks, and cast a long shadow over the world's second-largest economy.

The banking system of the 1990s was burdened with 90 trillion yen ($930 billion) to 100 trillion yen ($1 trillion) of bad loans, Financial Services Agency Commissioner Takafumi Sato said Wednesday at my press club, the Foreign Foreign Correspondents' Club of Japan.

Banks have repaid 8.45 trillion yen of the 9.6 trillion yen of public money injected into the financial system during the troubled decade. "That was good business in retrospect," Sato said. What Japan underwent offers lessons for the global financial crisis unfolding now, including the need for public money to prop up weakened banks.

«We have argued that Japan's experience in the 1990s provides useful suggestions as to how our fellow regulators should respond to the ongoing difficulties»

Lessons to follow?

Still, it's difficult to cash a foreign check in Japan or for a profitable foreign small and medium company to get a loan from a Japanese bank. They call it economic nationalism. Click here

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