Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

J. Brian Waterhouse has been covering the Japanese financial sector as an analyst continuously since 1976, working for CLSA, Japaninvest, Rabobank, HSBC Securities, James Capel, Marine Midland Bank of New York and National & Grindlays Bank.  He has been ranked No.1 overall in Japanese banks research in Japan by Asiamoney for 6 of the past 9 years and was runner-up in 2015.  He was awarded the coveted Starmine prize as top Japanese bank stock picker in 2012 and 2014 and was runner-up in 2013.  He frequently appears on TV, radio and in international print media as a commentator on Japanese banking.

Senior Bank Analyst - Japanese Banks

Japanese Bank Lending: An Ebb Tide in 2021?

Japanese Banks:  Buddy, Can We Spare You a Dime !

Japanese Banks:  Remember, Remember, the Thrift of November

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

<p>A combination of Japanese government and commercial bank lending has driven down bankruptcies in Japan to levels not seen since the ‘Bubble Era’ of the late 1990s.  That era was characterized by profligate lending by the commercial banks, and ended when interest rates went up after December 1999, leading to a ‘Lost Decade’ of commercial bankruptcies, burgeoning bad loans and tremendous losses for the banks; some Japanese banks failed, even large ones.</p><p>Total domestic commercial bank lending currently stands at around ¥534.9 trillion (US$5.1 trillion).  So far in 2020, the price for keeping all businesses afloat has risen to at least ¥44 trillion in additional lending, of which the commercial banks have contributed over ¥27.4 trillion, according to Japanese Bankers Association (JBA) data.  Many of these loans have been made at almost no profit margin to the banks as part of their ‘national service’ to support Japanese industry during the coronavirus pandemic.  When there is so much money freely available, everybody survives for the time being: the good, the bad, as well as the terminally indebted.</p><p>But, as we all know, there is no such thing as a “free lunch”.  There will eventually be a reckoning.  Even at zero interest rates, the principal amount will have to be repaid at some time, somehow, out of cash flow.  That assumes swift economic recovery, which may be a big ask, given current global economic conditions.  Alternatively, many of these loans can be offset by matching deposits, if the corporate ‘dash for cash’ in CY2020 ends with little cash actually having to be spent to support operations in the absence of new orders.  If not, perhaps another ‘Lost Decade’ looms?</p><div class="content-highlight"><p style="text-align: center;">We should like to take this opportunity to thank all our readers for their interest and support in following these Smartkarma Insights covering the Japanese banking sector, and to wish them a Happy, Safe and Prosperous New Year !</p></div>

A combination of Japanese government and commercial bank lending has driven down bankruptcies in Japan to levels not seen since the ‘Bubble Era’ of the late 1990s.  That era was characterized by profligate lending by the commercial banks, and ended when interest rates went up after December 1999, leading to a ‘Lost Decade’ of commercial bankruptcies, burgeoning bad loans and tremendous losses for the banks; some Japanese banks failed, even large ones.Total domestic commercial bank lending currently stands at around ¥534.9 trillion (US$5.1 trillion).  So far in 2020, the price for keeping all businesses afloat has risen to at least ¥44 trillion in additional lending, of which the commercial banks have contributed over ¥27.4 trillion, according to Japanese Bankers Association (JBA) data.  Many of these loans have been made at almost no profit margin to the banks as part of their ‘national service’ to support Japanese industry during the coronavirus pandemic.  When there is so much money freely available, everybody survives for the time being: the good, the bad, as well as the terminally indebted.But, as we all know, there is no such thing as a “free lunch”.  There will eventually be a reckoning.  Even at zero interest rates, the principal amount will have to be repaid at some time, somehow, out of cash flow.  That assumes swift economic recovery, which may be a big ask, given current global economic conditions.  Alternatively, many of these loans can be offset by matching deposits, if the corporate ‘dash for cash’ in CY2020 ends with little cash actually having to be spent to support operations in the absence of new orders.  If not, perhaps another ‘Lost Decade’ looms?We should like to take this opportunity to thank all our readers for their interest and support in following these Smartkarma Insights covering the Japanese banking sector, and to wish them a Happy, Safe and Prosperous New Year !

Japanese Banks: The ¥44 Trillion Free Lunch