Toyota President Warns of Global Stock Crash
the Japanese banking system at issue
Japan's economic woes could trigger a global stock market crash unless the country rapidly reforms the banking sector, the president of Toyota, the motor group, warned on Thursday.
"There is a possibility of Japan triggering a worldwide financial crisis, such as a steep stock market plunge involving Europe and the US," Hiroshi Okuda said. "To avoid that, [solving] the bad loan problem is an urgent task."
Mr Okuda, who was addressing Japan's Employers' Federation, where he is vice-chairman, has a reputation for being frank, but such an outspoken warning is still highly unusual for a business figure of his stature.
His appeal comes as some Japanese economists and western investors are expressing mounting concern that the country's ruling Liberal Democratic party may backslide on earlier commitments to take radical action to tackle the country's financial sector problems.
Such concerns have recently weighed on the markets. The Nikkei 225, the key stock market indicator, on Thursday closed 0.72 per cent lower at 15,876.22 - before Mr Okuda's comments were made public - pulled down by a sharp fall in bank shares.
The markets are likely to analyse carefully what Keizo Obuchi, Japan's prime minister, says to parliament on Friday in his first keynote speech since he was elected as LDP leader last month.
Mr Obuchi is expected to argue that the LDP is resolving the financial sector problems by presenting a bill to parliament next week which will create a "bridge bank" to wind up the affairs of insolvent banks. The Financial Supervisory Agency, Japan's regulator, is now conducting a two-month inspection of 13 large banks in an effort to boost international investor confidence in the banks and decide whether they should be closed.
However, a senior FSA official has said that the FSA cannot release the inspection results.
He said: "Our [civil service] code prohibits us from publishing the outcome of the inspections. It is up to the Japanese banks to decide whether they would like to disclose the results or not."
The FSA argues that "the only way this can be changed is through parliamentary procedure".
Some bureaucrats hope that market pressure will force the LDP to change the parliamentary procedure. The FSA insists that its inspection will be free from political pressure. "It is my strong intention to protect the independence of the inspectors," a senior FSA official said.
However, Brian Waterhouse of HSBC Securities argues: "The FSA will have no choice but to say that everything is fine. . . Nobody wants to declare a bank insolvent."
The Financial Times, August 6, 1998 |
