Bank of Japan Gov. Masaru Hayami sent a strong message to domestic financial institutions Tuesday, calling on them to make greater efforts to disclose information regarding their bad loans and effectively take steps to dispose them.
The move was also seen as an indirect effort to improve confidence in the economy in markets both at home and abroad.
A lack of confidence is sometimes cited as a factor behind the yen’s recent nosedive. “While it is totally up to the financial institutions to decide the extent to which they disclose the contents of their internal assessments (of their nonperforming loans), the Bank of Japan hopes that disclosure progresses and leads to the recovery of market trust in our financial system,” the BOJ head said in a statement.
Hayami said it was “a shameful situation” that Japanese financial institutions were still struggling with huge amounts of sour loans despite the fact that seven years have passed since the bubble economy imploded.
“If these nonperforming loans remain on their balance sheets, the eyes viewing the Japanese economy both at home and abroad will not brighten, and this is one of the major factors behind the recent sluggishness of the economy,” he told a regular news conference.
The BOJ has already informed the head of the Japan Federation of Bankers Associations of its position on the matter, but the issue of disclosure would be a decision banks should make voluntarily, he said.
Last week Satoru Kishi, federation chairman and president of the Bank of Tokyo-Mitsubishi, indicated that banks were cautious about the matter, citing the fact that financial institutions in the United States did not disclose their categorization figures.
At present, financial institutions place their loans into four categories depending on the degree they believe them to be collectable based on individual standards.
In addition, Hayami denied allegations Tuesday that the yen’s continued fall against the dollar was the major reason behind the weakening of other Asian currencies.
The excessive dependence of these economies on the dollar is the main factor behind their currency problems, he said.
Hayami did not comment on market rumors that authorities had intervened in currency markets earlier in the day to shore up the yen. “(The level of foreign exchange rates) in general needs to be left up to market forces, but often we see excessive movement in the market. At such times exchange levels are later corrected,” he said.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.