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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Henry Volquardsen who started this subject	1/16/2002 2:41:08 PM
From: Henry Volquardsen	of 3536

seattletimes.nwsource.com S&P: Japan's banks failing By Knight Ridder Newspapers TOKYO — Japan's major banks are "technically insolvent," the Asia director of the Standard & Poor's rating agency said yesterday. Michael Petit, the managing director of S&P's Asia Pacific office, said the country's banks have insufficient assets to cover their liabilities — including ordinary savings deposits — and require a giant infusion of public money just to stay in business. He expects a government bailout of the nation's banking system to come before the Japanese fiscal year ends March 31, and the S&P has decided not to downgrade Japan's government debt again. Petit's comments highlight the deepening crisis in Japan's financial system and the failure of previous reform and bailout efforts to rescue the economy from stagnation and deflation, or falling prices Past bailout efforts have protected bank depositors but have not rooted out the underlying problem: corporate borrowers unable to generate enough cash to pay off their debts and kept on life support by continuing credit from the banks. Petit's comments came as bureaucrats and politicians once again engage in the politically bruising debate of how much taxpayer money should be used to prop up Japan's banks. U.S. Treasury Secretary Paul O'Neill will arrive in Japan's capital next week to urge stronger government measures, amid fears that the country's worsening recession will damage prospects for a global economic recovery. Most U.S. experts think the Japanese government will do enough to keep the financial system from collapsing, but will undertake only modest steps to consolidate and write off the accumulated bad loans. S&P's Petit noted that for five years in a row, there have been more corporate credit downgrades in Japan than upgrades. Forcing old insolvent Japanese firms to shut their doors has proved difficult in a business culture where stability and human relationships have been more important than profits.

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