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Thu, Dec 26, 2002 - Page 12 News List

IMF joins in prophesying doom for Japanese banks

ADDED PRESSURE The fund is in the middle of a yearlong inspection of Japan's banks that some hope will shed light on the problem of the nation's bad loans

NY TIMES NEWS SERVICE , TOKYO

Japanese policy-makers have never been at a loss for ideas on how to clean up the nation's debt-laden banks. College professors, bank analysts and authors are forever offering opinions in newspapers and on television.

But in recent months, several international agencies have also raised loud alarm bells. The Organization for Economic Cooperation and Development, for instance, recently said Japan's banks needed more taxpayer money to survive.

Add the IMF to the list. The fund is in the middle of a yearlong inspection of Japan's banks that some hope will shed light on the problem of bad loans here. Sayuri Shirai, a former IMF economist with connections to her old employer, said the report, scheduled for next summer, would prove that several banks do not meet international capital standards.

After years of frightening warnings, though, the question is what impact these findings may have. Lawmakers and, to a large degree, the public have become so hardened to predictions of the financial system's demise that they tune out much of the advice, including some helpful ideas.

Complicating matters, the suggestions are often hurled by foreigners who are suspected of having ulterior motives. American bankers are often portrayed in the local media as vultures who swoop down on embattled Japanese companies, buy assets on the cheap and put Japanese employees out of work. Politicians stumping for votes routinely accuse Westerners and their Japanese sympathizers of financial imperialism.

More often than not, then, foreign advice, however useful, ends up fueling existing prejudices. The IMF report may will bolster reformers like Heizo Takenaka, Japan's financial czar whose plan to clean up the banking system has been diluted. Yet conservative lawmakers eager to maintain the status quo also may use the report to scare voters into opposing any radical reforms.

"The reaction goes both ways," said Michael Petit, the chief criteria officer at Standard & Poor's in Tokyo whose own credit reports have been volleyed around for political purposes. "Takenaka may try to use the international support, but the forces inside the government are ultimately the ones who say what gets decided."

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