Takenaka Tug-of-War with Banks Continues

Japan's Financial Services Agency has made public for the first time the fact that it believes bad loans at the country's banks are Y13,000bn ($109bn) greater than the banks say. The number here is not especially important in itself, it is however 36% higher than the banks own figure. This would seem to indicate a determination on the part of Takenaka and his team. One other confirmation of this assessment might be found in the fact that Tokyo stocks lost ground this morning, as the banking sector suffered the consequences of the increased assessment of their bad loan holdings:

The decision to release the figures is the latest step to strengthen banking supervision in Japan by Heizo Takenaka, pictured, the former academic and reformist cabinet minister who took charge of the FSA last month. It follows the release of a package of banking reforms late last month by the FSA, the country's main financial regulator, that requires bad loans fall by half by March 2005. The publication of the FSA's estimate rides roughshod over the sensitivities of senior executives at the country's largest banks and is likely to further sour relations between Mr Takenaka and the banks' boards of directors. In the FSA's assessment, Mr Takenaka said bad loans were Y47,000bn compared with the banks' figure of Y34,000bn.

The extent of bad loans and loan losses could grow further after the FSA completes another set of inspections of the banks - likely to begin in February - during which it will apply even stricter criteria. The figures released at the weekend were based on the FSA's latest inspection for April 2001 to March 20002. At that time the regulator was run by Hakuo Yanagisawa, who was sacked and replaced by Mr Takenaka. Banks review non- performing loans and loan-loss reserves twice a year. The FSA's February audit will help ensure the banks are accurately conducting their own reviews.
Source: Financial Times
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The benchmark Nikkei 225 average lost 1.8 per cent to 8,534.89, while the broader Topix index was off 1.9 per cent to 845.98. The banking sector was off 3.5 per cent, with Mizuho Holdings, the world’s biggest bank by assets, off 7.7 per cent to Y156,000. UFJ Holdings was down 8.9 per cent to Y143,000, while Sumitomo Mitsui was off 6.3 per cent to Y418. Adding to the gloom was data released Monday morning that showed Japan’s current account surplus – a broad measure of trade in goods and services – slipped 6.8 per cent in September, for the first time in a year. The data adds to mounting evidence that the country’s fragile export-led recovery has peaked. Japan’s top exporters lost ground on the news, with Sony shedding 3.3 per cent to Y5,020 and Toyota Motor off 1.6 per cent to Y3,090. Honda Motor lost 4.9 per cent to Y4,100 and consumer electronics maker Sharp was off 2.1 per cent to Y1,080. Semiconductor maker Advantest was 4.3 per cent lower to Y4,680 and rival Tokyo Electron was down 5.4 per cent to Y5,010.
Source: Financial Times
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