It's nice to still be able to laugh with Softbank in the crapper. <G>. Anyway, this was posted on Bloomberg and is food for thought:
quote.bloomberg.com
Orix's Fujiki Urges Rate Rise in a Break With Business Leaders
By Bradley Meacham
Tokyo, July 25 (Bloomberg) -- Orix Corp. President Yasuhiko Fujiki said Japan needs to raise interest rates to coax companies into being more efficient, contrasting the views of much of the country's business community, which could be hurt by such a move.
The president of Orix, Japan's largest finance firm, said the central bank should raise interest rates as soon as possible, aligning himself with Bank of Japan Governor Masaru Hayami, who has been on a campaign to end Japan's 17-month-old zero interest rate policy.
The BOJ board decided last week to hold rates near zero amid concern the first rate rise in a decade could trigger more bankruptcies like the collapse of Sogo Co. The board meets again on Aug. 11.
``Delaying (a rise) longer means delaying the recovery of Japan's economy,'' Fujiki said in an interview.
Orix's comments are among the most enthusiastic yet from the finance industry in favor of ending the BOJ's zero-rate policy. Commercial bankers, who face squeezed margins and more bad loans if rates go up, mostly want the BOJ to maintain current rates.
Fujiki is betting that raising rates will lead to an improved economy, and that will ultimately have a positive effect on Orix's leasing, insurance and consumer finance businesses.
``People seem to say interest rates are going up so this will be negative for financial firms,'' said Mizue Hosokawa, an analyst at Morgan Stanley Dean Witter & Co. ``But it really depends on the company's balance sheet.''
Orix, which has posted profits for 36 consecutive years as it expands from its leasing roots into new business areas, also expects a rate increase would stimulate other companies into making reforms that it could benefit from, Fujiki said.
Branching Out
The company is building an investment banking operation to advise troubled Japanese companies on mergers and acquisition, managed buyouts, and other forms of reorganization. Fujiki wouldn't specify targets for the operation, yet said he sees the market for such services growing for at least the next two to three years.
``Companies need to reconsider their capital raising (methods),'' he said.
In the last year Orix shares have increased more than 50 percent, more than the Tokyo Price Index of stocks traded on the Tokyo Stock Exchange's first section. The exchange's subindex of nonbank financial companies has lost 22 percent over the same period.
Orix also recently entered the commercial banking business. The company joined with Softbank Corp. and others in a successful bid to take control of Nippon Credit Bank Ltd. from the government least month. The group will take over the failed lender on Aug. 1.
Leading Reforms
Orix also plans to use this newfound position in the banking industry to help lead the reforms that other commercial lenders aren't doing, Fujiki said.
The revived Nippon Credit, which will have Orix staff on its board, will pay more attention to returns for shareholders than many other banks, following the lead of Shinsei Bank Ltd., he said. That would mean putting shareholders above debt-laden clients, even if means pushing some firms into bankruptcy.
Last month the government agreed to use taxpayer money to buy some debts of Sogo as part of a contract with Shinsei's foreign investors to buy credit that had dropped in value.
Other banks, which sold shares to the government in 1999 in exchange for about 7.5 trillion yen in public funds, have been reluctant to take any action that could hurt debtor firms and lead to job losses.
So far many have said they prefer to work with their borrowers, including forgiving loans, rather than push troubled companies out of business.
The Sogo collapse is one reason cited by the BOJ for its decision not to raise rates at its July 17 meeting. Japan could see more Sogo-like failures when interest rates rise, increasing the cost of funds for struggling companies and putting scores of employees out of work.
Fujiki said that argument is only an excuse for maintaining the status quo, since the country's new bankruptcy laws provide help for companies that need to restructure.
``We need to use those laws and send a clear, public message,'' he said.
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