Can Japan’s megabanks ignore the devil's whisper?
The last time a financial crisis hit Japan, the fallout was exacerbated by the agonizing slowness with which management disclosed their problems. This time around executives at all three financial groups have told Euromoney that their firms had little to hide; that they had disclosed almost all of their exposure to sub-prime related securities.
According to FSA figures, the sum for all Japanese banks now stands at just over ¥600 billion (about $6 billion), less than the total loss at some US banks but still three times as much as had initially been disclosed. This is an ominous trend. The ever-increasing scale of the losses might be explained by cumulative write-downs as sub-prime related investments bleed value: the banks, in other words, are disclosing losses as their portfolios lose value.
There might, however, be some truth to the suspicions of traders at foreign banks in Tokyo that some megabanks decided not to announce losses in order to make an already-disappointing reporting season less depressing for shareholders.
Analysts at Standard & Poor’s and Japanese firm Rating and Investment Information say that there are more losses to come but that they don’t expect significant surprises on the scale of write-downs at the worst-hit US banks.