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Source: www.asiaecon.org |


While the credit crisis has deterred the United States and European banks from lending, Japanese banks are becoming increasingly prominent on the international financing scene.

While the credit crisis has deterred United   States and European banks from lending, Japanese banks are becoming increasingly prominent on the international financing scene.

When the Japanese property and stock market took a dive after a peak in 1990, the banks retreated home where they’ve directed almost all their attention for the past twenty years. Today however, Japanese banks are flushed with credit while other lenders are crippled with bad debts.

In January, Mizuho, one of the largest banks in Japan invested $1.2 billion in Merrill Lynch. Mizuho has also strengthened its collaboration with Merrill Lynch in the areas of of project finance, mergers and acquisitions, risk-sharing, corporate finance, and financial advisory projects. Another one of Japan’s largest banks Sumitomo Mitsui Financial group spent $998 million to take a 2% stake in the British bank Barclays. Mitsubishi UFJ Financial Group is also consider investing in Western financial firms after the subprime crisis.

Japanese banks may be venturing forth because of cheap assets and a lack of competition from other lenders. United States and European financial institutions are facing mortgage prices much higher than those in Japan. In addition, Samurai bonds, yen-denominated bonds issued in Japan by foreign borrowers, are starting to tap into the retail market where they have $7.3 trillion reserved in cash deposit accounts with insignificant earning. This year overseas issuers, such as the government in Thailand and Australian lenders, have sold a record $13.5 billion worth of bonds in Japan, and that number is expected to increase dramatically during the rest of 2008.

Borrowers have been drawn to Tokyo’s bond market because of low interest rates. The Bank of Japan (BOJ) has held it’s key interest rate at 0.5% for seventeen straight months. The negative impact from the rising cost of energy and raw materials has led to the country’s economic slowdown. In an effort to maintain economic growth, the BOJ will probably not raise the interest rate any time soon, making it cheaper for fund-raisers.

Investors have already begun looking into Samurai bonds because they offer premiums over Japanese rates. For example, Royal Bank of Scotland sold ¥141 billion in a four-part bond in June. Thailand sold ¥55 billion in Samurai bonds while the South Korean cable maker LS Cable raised ¥10 billion.

In the past twenty years, Japanese banks have taken very little risk and have focused almost exclusively at home. Consequently, they have developed a reputation for being cautious. However, with the recent ventures of Mizuho and Sumitomo Mitsui Financial, Japanese banks seem to be on the brink of taking major risks, or at least calculated risks. In fact on July 11, Japan’s Shinsei Bank cut a deal with General Electric to purchase GE Money, the Japanese consumer finance unit of General Electric, for $5.4 billion. But whether the Japanese will continue to look abroad remains to be seen. It’s clear that they the cash, ability, and credit on reserve. They may have their eye on United States markets, including Real Estate.

Source: www.asiaecon.org |

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