For those watching "As the World Turns" in Japan, this just hit the Financial Times:
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WEDNESDAY AUGUST 19 1998ÿÿAsia-Pacificÿ
Japan in 4,000bn sales of bad loans
By Gillian Tett in Tokyo
Japanese banks have sold property-related bad loans worth 4,000bn ($27.5bn) at face value, mainly to foreign investors, according to Bank of Tokyo-Mitsubishi.
The sales began about 18 months ago as the country's banks struggled to restore their balance sheets after the end of the 1980s property boom.
The banks have previously been reluctant to release the figures. Sachio Mikumo, senior manager of BTM credit policy division, said: "There are no precise figures but we think the total will be about 4,000bn next month. It's rising fast."
BTM, Japan's largest bank, has accounted for almost 200bn of the sales. This is thought to leave it second only to Sakura bank, which has sold about 400bn. The Industrial Bank of Japan, Fuji, Sumitomo, Daiwa, Sanwa and Dai-Ichi Kangyo are also active.
The government is scrambling to implement measures to increase the sales of bad loans to remove 88,000bn worth of problem loans. These measures include plans for special purpose companies for securitisation, to simplify the property code, and give tax breaks to banks making bad loan sales.
BTM says these measures mean that the market should surge further this year. One US banker said: "There could be a dramatic boom, particularly with the yen so cheap. There's growing interest among US investors."
However, banking analysts warn that sales so far are tiny compared with the total problem loans. Some also suspect that Japanese banks remain reluctant to sell too quickly.
Yoshinobu Yamada, analyst at Merrill Lynch, said: "If the banks sell bad loans they have to realise secondary losses." He added that most have made reserves on their accounts for the bad loans on the assumption that the property was still worth 70 per cent of its peak value. However, in reality, it had often fallen to 15 per cent of its peak.
BTM admits that most loans have been sold at a discount, although Mr Mikumo said this discount "varies greatly . .. between 80 per cent and 3 per cent of face value." He acknowledged that almost all sales had been to foreign investors.
The most active foreign investors are believed to include Goldman Sachs, Loanstar Opportunity Fund, Secured Capital and Merrill Lynch. However, BTM says some Japanese investors have started to enter the market.
The largest single sale conducted by BTM so far was concluded early last month and involved 110bn worth of bad loans. It is believed to have been the first sale made through a sealed bid auction. BTM also made a 50bn sale in June and three smaller sales late last year.
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And strength from another Axis Power:
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WEDNESDAY AUGUST 19 1998ÿÿEuropeÿ
GERMANY: Minister sees rosy future for economy
By Peter Norman in Bonn
<Picture: Graph>The German economics ministry yesterday forecast that unemployment would fall faster than previously expected this year and predicted that economic growth would average a real 2.5 per cent a year to 2002.
Declaring that the current economic upswing was "no flash in the pan", Gnter Rexrodt, the economics minister, said he now expected unemployment to fall by about 350,000 to under 4.2m in the 12 months to the end of December.
He said the estimated fall, which revised his earlier forecast of a 300,000 drop, was "on the conservative side" and could turn out to be even steeper. The government expects the unemployment total to fall to about 3.5m in 2002.
The minister predicted that growth would increase from 2.2 per cent in 1997 to 2.9 per cent this year, near the upper limit of the government's 2.5 per cent to 3 per cent forecast range. He said the economy would expand "by a good 3 per cent" next year.
Although economic crises in Asia and Russia posed risks, he considered that these were manageable and said they were offset by favourable conditions in western Europe and a strengthening domestic economy.
Apparently to forestall suspicions that he was painting too rosy a picture ahead of next month's general election, Mr Rexrodt insisted that his ministry had weighed all known facts in its forecast. Mr Rexrodt reported that in the second quarter the economy grew by about 0.5 per cent compared with the first quarter, with gross domestic product between 1.5 per cent and 2 per cent up on the 1997 second quarter.
Although year-on-year growth fell from the first quarter's 3.8 per cent, there was no slowdown, as the first-quarter performance had been inflated by special factors, including a mild winter, a larger number of working days and purchases ahead of the increase in April of value added tax from 15 per cent to 16 per cent.
He also forecast a quickening recovery in the former communist east Germany. While the new L„nder, or states, would grow by about 2 per cent this year and so lag behind western Germany, the east German growth rate was expected to catch up with the west next year and to be higher from 2000.
The minister said the economy was being increasingly supported by domestic demand, which was expected to grow by 2.5 per cent this year.
Mr Rexrodt based his expectations of a continuing recovery on the improved competitiveness of German companies, which reflected the effects of rationalisation, a more competitive exchange rate and moderate wage increases.
Strong export growth had encouraged investment, with spending on plant and equipment expected to grow this year by between 7.5 per cent and 9.5 per cent. Meanwhile, investment growth was in turn creating jobs and purchasing power, said Mr Rexrodt.
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