Japanâs Banking âCrisisâ (CRS Report for Congress)
| Release Date |
Aug. 17, 2001 |
| Report Number |
RS20994 |
| Report Type |
Report |
| Authors |
Dick K. Nanto, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
The Japanese economy is burdened by an overhang of nonperforming bank loans that are
officially
recognized to total $367.5 billion but could exceed a trillion dollars if all problem loans are taken
into account and economic conditions worsen significantly. These bad loans have weakened Japan's
already sluggish economy, undermined the strength of the yen, and are exacerbating the slowdown
in Asia's economies. In recent years, Japan has averted a replay of the crisis conditions that
accompanied earlier failures of financial institutions, but the problem is immense, and restoring
health to the balance sheets of Japanese banks remains a top economic policy concern both in Tokyo
and in international financial circles. After nearly a decade of repeated attempts to resolve the
problem, the current Koizumi government has set a new deadline for banks to write off the worst of
the loans within three years even if this causes as many as 200,000 lost jobs and numerous
bankruptcies. The United States and Japan have initiated a Financial Dialogue led by the U.S.
Treasury to discuss various financial issues - including the bad loan problem - and the Bush
Administration has said it would assist Japan in pursuing its economic reforms in any way it can.
