Thread,
I had expected someone else to have posted this article and was slightly surprised, to see, no one had. So I take it, most believe this is, "same old, same old." Can't blame anyone.
But it appears like Obuchi and Parliament may finally be getting serious. Who knows, but the article is interesting. This story has been around for about three days now. That's probably a record in itself! So just maybe this time is different?
MikeM(From Florida)
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Japanese Bank Reform Pact Will Let Government Seize, Close Crippled Banks
Tokyo Agrees to Bank Reform Pact; U.S. Reviews Plan
Tokyo, Sept. 18-- Japanese leaders agreed on a plan designed to restore the nation's debt-burdened banks to health, a crucial step to reviving growth in the world's second-largest economy. The plan calls for a government takeover of some of the country's biggest and weakest banks, closing smaller institutions and pumping trillions of yen in taxpayer money into the banking system to dispose of bad loans.
The prolonged debate over what to do about Japanese banks took on new urgency in recent months as it became clear that Japan's slumping economy -- now in its third quarter of contraction -- threatened growth around the world. ''I'm determined Japan won't be the source of a global financial meltdown,'' said Prime Minister Keizo Obuchi. ''Restoring financial stability to Japan will quickly lead to a revival of the economy.'' With the recession deepening around Asia, investors deserted risky emerging markets. Companies from Paris to Palo Alto warned of falling profit, sending stock markets tumbling. Economists began reducing their forecasts for growth in both the U.S. and Europe -- the twin engines of world growth.
U.S. President Bill Clinton and U.S. Treasury Secretary Robert Rubin are expected to discuss the banking plan during Obuchi's visit to New York on Tuesday. ''We are in the process of reviewing the developments on Japanese banking reform,'' a U.S. Treasury spokesman said in Washington. ''We look forward to discussing the plan with Prime Minister Obuchi during his visit.''
After watching successive Japanese governments shrink from tackling the 77 trillion yen ($580 billion) or more of problem debt held by the nation's banks, there are plenty who doubt the politicians are serious this time. Yet the compromise hammered out today between Obuchi and opposition leaders, by calling for the government takeover of Long-Term Credit Bank Ltd., one of the country's biggest and sickest banks, may mark a significant turning point. Obuchi's ruling Liberal Democratic Party also agreed that the Finance Ministry will be stripped of much of its authority over banks, a move that could help end the cozy relationship between regulator and regulated that critics argued helped create the current crisis.
Precisely how the bailout would be structured wasn't immediately clear. Both government and opposition representatives had earlier said that they wanted to create a new government agency similar to the U.S. Resolution Trust Corp. to buy up bad loans with public funds, recouping some of the money through the sale of the assets that backed them. The vagueness of the agreement sparked speculation that it would soon fall apart. That's not likely to happen since Obuchi's political future is riding on the success of the banking bills, said Minoru Morita, a well-known political analyst. ''The most likely scenario is that Obuchi holds on to the agreement in order to survive,'' said Morita. ''If the agreement collapses after the U.S.-Japan summit talks, that would pressure him to resign and dissolve the Cabinet. That's the last thing Obuchi and the ruling party want to see.''
In anticipation a compromise was imminent, Japanese stocks rose after three sessions of declines, with the benchmark Nikkei 225 index climbing 123.98 points to 13,983.1. The agreement was announced after the close of trading. ''The agreement does look very encouraging,'' said John Hayter, who helps oversee 1.6 billion pounds ($2.7 billion) at Pavilion Asset Management in London. ''We're thinking very seriously about buying bank shares and I would imagine we're not alone.''
That would be good news for bank shares that have taken a beating over the past year, as investors worried they were in worse shape than they let on, and rating companies cut their credit ratings. ''Nobody trusts anything anymore,'' said Naoko Nemoto, an analyst at Standard & Poor's Corp. ''Not the publicly announced bad-loan figures nor the things that the Ministry of Finance or financial supervisory agency say. It's an awful situation.''
Long-Term Credit Bank of Japan, which is down 96 percent compared to a year ago, saw its shares drop 60 percent in June alone, on concern the bank couldn't repay debts. LTCB has enough money to repay all its obligations and isn't in default, said a Bank of Japan official who asked to remain unnamed. Nikkei reported that BOJ will extend special credit that requires no collateral to LTCB. Other banks among the worst performers include Yasuda Trust & Banking Co., Fuji Bank Ltd. and Mitsui Trust & Banking Co., all of which have declined more than 70 percent in the last year, compared with a 45 percent drop in the industry index. Daiwa Bank Ltd., Sumitomo Trust & Banking Co. and Sakura Bank Ltd., have all dropped more than 60 percent.
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