japans bad loans

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    From Bloomberg:

    Failures reflect bad-loan crackdown
    January 21 2003
    By Daisuke Takato

    Japanese corporate bankruptcies reached their fourth-highest total in 2002, as Prime Minister Junichiro Koizumi's push to force banks to write off bad loans and a slowing economic recovery from recession sent 19,087 companies bust.

    Corporate failures among companies with debt exceeding ¥10 million ($A143,415) fell 0.4 per cent from a year ago, according to credit researcher Tokyo Shoko Research. The failed companies owed ¥13.8 trillion in debt, 16.5 per cent less than last year.

    In December, bankruptcies fell 7.2 per cent from a year ago to 1421 cases, the Tokyo Shoko report showed. Debts owed by failed companies totalled ¥757 billion, a 50 per cent drop from last year.

    A record 20,841 companies went bust in 1984.

    Bankruptcies this year were highlighted by the failure of 29 publicly traded companies, more than double the record of 14 set last year, as banks cut off delinquent borrowers. Mr Koizumi is pushing banks to write off a government-estimated ¥52.4 trillion in non-performing loans, which may spur more bankruptcies, economists say.

    "With the bad-loan write-off push, we can expect more bankruptcies, especially when most companies close their fiscal year books in March," said Minako Iida, an economist at Deutsche Securities. One such Koizumi policy that may incite bankruptcies is the 3 per cent cut in public works spending for the fiscal year ending March 2004. Bankruptcies among construction companies accounted for about 30 per cent of all failures, with 5976 cases last year.

    General contractor Sato Kogyo Company, golf course operator STT Kaihatsu, and hotel operator Chisan Company were the three biggest bankruptcies by debt in 2002. All three companies went bust as Mizuho Holdings, UFJ Holdings, and other lenders cut off credit.

    Other companies, such as retailer Takarabune Company, are failing because they are unable to repay loans secured during the 1980s with land that has since fallen in value by as much as 70 per cent.

    The Saitama-based furniture retailer filed for court protection from its creditors with [PI9035]¥9.5 billion in debt last week, becoming the first publicly traded company to go bust this year.

    Growth in the world's second-biggest economy is slowing as production fell for the third month to November, and the jobless rate hovered just under a record high at 5.3 per cent.

    That prompted the government to lower its evaluation of the economy on Friday, saying a recovery from the third recession in a decade has "weakened".

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