The Bank for International Settlements on Monday issued a dire warning to Japan over the shaky position of its banking system, urging the government to explain to taxpayers that their money could again be needed to clean up the problem-loan situation.
The Japanese government "should be preparing the public now for possible increases in the government deficit" in preparation for injecting public funds into the banks' capital accounts, the BIS said in its 72nd Annual Report, which presents its macroeconomic policy recommendations.
"The recent special examinations of suspected weak credits by the Financial Services Agency will prove useful if they induce the banks to stop providing credit to the uncreditworthy," the Basel-based policy-coordination body for central banks said.