Credit in Japan

Beginning of article

The Japanese economy has slowed to a snail's pace since its high point in 1990. The stock market remains weak and volatiel. Trading volumes stay far below 500 million shares a day, and only a few brokerage houses posted profits at the end of March 1992.

Land prices went down about one-third, and the banking industry is still in trouble. Non-performance loan amounts are huge due to the collapse of the stock and real estate investment markets. Some financial institutions are undergoing debt restructuring, mostly at the sacrifice of the major banks.

The government has announced special measures to stimulate the economy by accelerating public investments. But the private sector still holds its fists tight, and there is no sign of upturn in equipment investments.

Despite all of the above, the Japanese economy is still strong compared to other nations. Even within the banking industry, which is heavy with potential bad debts and facing more regulation by the Bank for International Settlements, major failure is not a threat. There is no fear of country risk, nor the possibility of defaults in letters of credit opened by Japanese banks. The bullish commentators predict the Japanese economy will turn the corners sometime this summer, while the bearish say it will not show an upturn until the end of the year. Regardless, within the next 12 months, there should be signs of recovery.

Failures Stress Importance of Credit Management