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Mon, Dec 29, 2003 - Page 12 News List

Japan's banks quickly shedding bad loans: official

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Japan's Economic and Fiscal Policy Minister Heizo Takenaka said the proportion of bad loans held by large banks in Japan is declining quicker than he expected and is approaching a level of less than 5 percent.

"Japan's financial appearance is changing," Takenaka said on Fuji Television's Hodo 2001 program. Financial reform, including action by the banks, "is in line with what we assumed a year ago, or rather a bit faster."

Takenaka introduced a plan last year to force Mizuho Financial Group Inc and other large banks to halve their bad loans by March 2005. Mizuho, Japan's largest lender, and its three closest rivals said on Dec. 3 their outstanding bad loans were ?13.8 trillion (US$129 billion) as of Sept. 30, down 31 percent from a year ago.

Mizuho, Mitsubishi Tokyo Financial Group Inc, Sumitomo Mitsui Financial Group Inc and UFJ Holdings Inc all expect to return to profit this year, after two years of combined record losses, as the strengthening economy helps borrowers repay debt.

The four forecast a combined ?1.23 trillion in net profit this year, as they expect the cost of dealing with bad loans to fall two thirds.

Businesses are more optimistic than they have been in six-and-a-half years, according to the Bank of Japan's Tankan survey of business confidence, released Dec. 12.

Mizuho, Japan's largest lender, said its bad-loan ratio stood at 5.8 percent as of Sept. 30, compared with 6.44 percent a year earlier, while Sumitomo Mitsui Financial Group Inc, the second-largest, said its ratio was 7 percent compared with 9.4 percent last September.

Mitsubishi Tokyo Financial Group Inc, Japan's largest bank by market value, said last month it cut its bad-loan ratio in half to 3.8 percent at the end of September from 8.1 percent as of the end of March last year, meeting a deadline set by regulators nearly 18 months early.

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