The International Monetary Fund voiced concern Thursday for Japanese banks fighting to stay afloat in increasingly stormy waters.
"Continued high loan losses as well as losses on banks' substantial equity portfolios will reduce bank capital," the IMF said of the Japanese banking sector in its quarterly Global Financial Stability Report.
The report says that although Japanese banks have attempted to boost core profitability by such means as charging higher interest rates to a few borrowers, the weak financial state of most borrowers -- especially small and medium-size enterprises -- provides limited room for growth.
"Operating profits are therefore unlikely to increase significantly, particularly since bond and derivatives trading gains -- which boosted profits of the major banks in the latter half of fiscal 2001 -- appear largely unsustainable," it says.