Bad Loans On the Rise in Japan

Darlington Musarurwa
10 Feb, 2009
New York City

Stocks in Tokyo edged lower after consumer confidence dropped the most in 26 years and bad loans in the six months to September rose sharply. The loan quality at nine largest banks deteriorated as exports slow and manufacturing and construction struggles.

[R]5:00AM New York, 7:00PM Tokyo- Japan consumer confidence eases in January and bad loans rise to 12.3 trillion yen in six months to September 31.[/R]

Stocks in Tokyo trading fell 0.3% after a spate of negative data that indicated the country''s consumer confidence plunged the most in 26 years. A rise in bad loans in the six months to September also unnerved investors.

In Tokyo trading Nikkei 225 index declined 0.3% or 23.09 to 7,945.94, and the broader Topix Index dipped 0.1% or 0.80 to 778.10.

In the first section of the Tokyo Stock Exchange 8.6 billion shares worth 568 billion yen were traded and in the second section 71 million shares valued at 810 million yen changed hands.

Of the Nikkei 225 index stocks, 89 increased, 124 declined, and 12 were unchanged. Nissan Motor Co. led advancers in the index shares with a rise of 7.3% followed by OKI Electric Industries gaining 7.3%.

Consumer Confidence Eases to 26.4 in January

Japan''s Cabinet Office reported today that the country''s consumer confidence eased to 26.4 in January from 26.2 in the previous month, staying at its lowest level in 26 years.

The overall livelihood index rose to 29.2 from 28.5 in December, while the index measuring income growth dropped to 31.4 in January from 31.5 a month earlier.

According to the cabinet office, the employment and willingness to buy durable goods indexes fell to 14.2 from 15.4 and rose 30.6 from 29.4, respectively.

Bad Loans Rise to 12.3 trillion yen

Financial Services Agency reported today that bad loans at the country''s 121 banks rose the most since fiscal 2001, increasing by 889 billion yen to 12.3 trillion yen in the six months to September 30.

The total of bad loans at Japan''s top nine banking giants increased 425 billion yen to 4.2 trillion yen and those at 110 regional lenders advanced 406.0 billion yen to 8 trillion yen.

Of the 110 lenders 64 are regional banks and 45 are second-tier regional banks.

Bad loans were computed under bad-loan definitions of the financial system revival law.

The FSA said the ratio of bad loans to the balance of loans increased 0.1 percentage points to 2.5% and warned the balance of bad loans may rise further during the six months to March 31.

Gainers & Losers

Nissan Motor Co. led advancers in the Nikkei 225 index shares with a rise of 7.3% followed by increases in OKI Electric Industries of 7.3%, in T & D Holdings of 6.8%, in Mitsui Engineering & Shipbuilding of 4.8%, and Sumitomo Mitsui of 4.4%.

Kobe Steel led decliners in the Nikkei 225 index shares with a drop of 12.7% followed by losses in Nomura Holdings of 9.4%, in CSK Holdings of 9.1%, in Clarion Co. Ltd of 8.8%, and Japan Steel Work of 7.5%.

Orix Cuts Annual Net Income Forecast by 86%

Orix today cut its full year profit estimate by 86% after it booked a third quarter charge of 62.9 billion yen on write-downs on investment.