Japanese Banks: It Ain't So If You Say It Ain't So

When is a non-performing loan not a non-performing loan? When you say it isn’t! Bloomberg reports:

Oct. 6 (Bloomberg) — Japanese banks’ bad loans won’t be driven higher by a proposed moratorium on debt payments by struggling small companies, said Financial Services Minister Shizuka Kamei.

Lenders won’t have to classify loans encompassed by the plan as non-performing, Kamei, 72, said in an interview yesterday at his office in Tokyo. That means they won’t be forced to boost provisions when borrowers postpone repayments of interest or principal, he said. At the same time, Kamei vowed to push banks to extend more credit to small businesses after bankruptcies hit a six-year high in Japan.

“We’re going to get financial institutions to provide these firms with more loans,” said Kamei. “Banks won’t have to treat debt on which they provide a moratorium as bad.”

The Topix Banks Index has fallen 9.2 percent since Kamei, who has blamed“unbridled capitalism” for the global credit crisis, was appointed by Prime Minister Yukio Hatoyama on Sept. 16. Kamei’s plans may put pressure on large banks’ credit ratings, said Naoko Nemoto, managing director at Standard & Poor’s in Tokyo.

Why didn’t I think of this? Dang! I could’ve been President! Nobody’s unemployed — we just refuse to classify people who aren’t working as unemployed! They’re early retirees (at 19), or Buddhist monks, or hippies, or whatever. The unemployment rate is zero! And there aren’t any bankruptcies, just people who decided to seek enlightenment away from the business world.

Comments

[BGRT:]

"we just refuse to classify people who aren’t working as unemployed!" - this is what China does (and the US to a lesser extent), which is why you get unemployment rates of something like 5% If you ever visit China you know that's not even remotely true.

Oct 07 05:20 AM

[Perki:]

Yes, when we switched our "Official" unemployment rate, in the late '90's, from the U-5 (currently 11.1%) to the U-3 number (currently 9.8%) and though we still ignored the real number, U-6 (currently at 17%), we improved the economy measurably.

Now, if we changed the "Official" number to the U-1 figure, our unemployment would instantly drop to 5.4%. Problem solved!

Oct 07 10:20 AM

[djackson:]

Actually, as I understand it, the Chinese finesse the employment issue something along these lines. Your factory is closing and you will be unemployed (and counted as such). Along comes a cadre and offers you a 'bonus' to resign. The amount is for more than you would receive otherwise, so you take it and resign. Then you are not considered unemployed by their methodology.


On Oct 07 05:20 AM BGRT wrote:

> "we just refuse to classify people who aren’t working as unemployed!"
> - this is what China does (and the US to a lesser extent), which
> is why you get unemployment rates of something like 5% If you ever
> visit China you know that's not even remotely true.

Oct 07 02:12 PM

[djackson:]

David, you did not half to think of it because we are already doing something quite similar. I seem to recall the accounting profession ceased requiring banks to mark-to-market last spring. See no evil . . . . And it seems to have worked. Citi is up over 300%.

Oct 07 02:16 PM

[meridian575:]

Nice article. There is a Yahoo Finance article on the Canadian banking industry in light of the weakening U.S. Dollar:
finance.yahoo.com/news...

Oct 07 03:48 PM

[Annualgain:]

This proposal from the Japanese finance minister makes a mockery of the capitalist banking system. Who is this guy, Kamei? His lack of responsibility is astounding.

If this isn't a reason to short the yen, I don't know what is.

Oct 08 11:28 AM