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Monday January 12, 11:55 pm Eastern Time
INTERVIEW-Japan banks may face further downgrades
By Fumiko Fujisaki
TOKYO, Jan 13 (Reuters) - Japanese banks, still reeling under the weight of massive bad loans,
may face further downgrading unless the government takes appropriate economic stimulus
policies, Koyo Ozeki, a director of international rating agency Fitch IBCA, said on Tuesday.
He said in an interview with Reuters Financial Television (RFTV): ''The current situation of the
banking system should fairly be called a crisis. The origin of the crisis is to a large extent
macroeconomic issues rather than a problem of individual banks.''
Asked about further downgrading of Japanese banks, he said: ''It is possible, given the current
situation, because the economy is slowing down and asset prices continue falling and the Asian
economy is facing a very risky situation.''
''Unless the government takes appropriate policies...there is the risk the total economy faces a
kind of meltdown,'' he said.
Ozeki expressed concern that the government's plan to use up to 30 trillion yen of public money
to stabilise the nation's bad loan-laden financial system might be wasted under the current
economic situation.
''...30 trillion yen looks like big money, but if it is not utilised in an appropriate way, there is the
risk that money is totally wasted,'' he said.
On Monday, Japan's parliament began a session expected to focus on measures to stabilise the
nation's rickety financial system.
While the government has worked out a package of the measures to shore up the system,
economists expect heated debate in parliament, particularly over provisions to use the public
funds of up to 30 trillion yen to protect depositors and to help increase capital at financial
institutions.
Ozeki said a continued fall in Japanese stock prices could trigger an economic crisis in Japan.
On Tuesday, the key Tokyo stock index, the Nikkei 225 average, lost 26.78 points to end the
morning session at 14,637.66. It recovered later, rising 0.59 percent or 85.81 points to 14,750.25
by 0448 GMT.
Ozeki said a level of around 15,000 for the Nikkei average was critical, and that the Japanese
economy could face a crisis at levels below 14,000.
''A level under 14,000, is a problem not only for the banking sector but for the entire Japanese
economy,'' Ozeki said.
Ozeki said authorities should not delay implementation of measures to solve problems in the
banking system and that Japan should promote steps to resolve the question of insolvent banks
and provide guidance to troubled banks for a drastic restructuring.
He said Japan may risk a further rise in problem loans in the banking sector if the economy
continues to slow down.
The Ministry of Finance (MOF) revealed on Monday that problem loans held by Japanese
banks run to around 76 trillion yen, more than three times previously accepted estimates.
Ozeki said Fitch IBCA had already factored in the figure in its scrutiny of Japan's banking
sector.
In the past several months, international rating agencies have downgraded the credit of Japan's
top banks. The move follows announcements last year by 13 of Japan's top 19 banks that they
would post losses in the current business year ending March 31 to clean up their bad loan mess.
In the latest downgrading, Moody's Investor Service downgraded Sanwa Bank's debt last week.
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