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Bank stocks plumb new depths
By Alex Frew McMillan and wire reports
TOKYO, Japan -- Bank stocks continued their headlong plunge on Thursday, increasing the pressure on the government to bolster Japan's economy. Both UFJ Holdings and Mizuho Holdings, the biggest bank in the world by assets, touched new lows before recovering in afternoon trade. With their large shareholdings, often in their customers, the banks are caught in a downward spiral with the overall Tokyo stock market. Daiwa Institute of Research estimated that the biggest banks are carrying 5.1 trillion won ($41.4 billion) in unrealized stock losses on their books. If the market continues to fall, larger losses could ultimately force capital-adequacy ratios at the Top Four banks below the 8 percent level required to do international business. The Nikkei has slid more than 13 percent since Prime Minister Junichiro Koizumi shuffled his cabinet last week, a move that heralded a tougher stance on the banks and their disposal of bad loans. Unprecedented lowsBank-stock declines knocked Japan's Nikkei 225 average to yet another new 19-year low in morning trade. It broke for lunch down 3.11 percent at 8,273.67, its lowest level since 1983.
On Thursday morning, UFJ sank to 153,000 yen, its lowest level on record, though it has rebounded to be in the black at 183,000 yen in afternoon trade. Mizuho Holdings touched 150,000 yen, also a new depth, though it has also rebounded to find itself up 2 percent at 177,000 yen near the close. Sumitomo Mitsui, down 0.99 percent, and Mitsubishi Tokyo Financial Group, off 4.23 percent, didn't sell off as drastically in the morning and have yet to retouch the lows they set in February. The appointment of new Financial Services Minister Heizo Takenaka last week precipitated the slide in financials, suggesting Japan will tackle bad loans -- a move many overseas analysts have long advocated. But the rapid speed of the stock selloff is causing alarm in Japan, where equity watchers say the government and the Bank of Japan needs to show how it will address deflationary pressures, a depressed economy and the plummeting stock market. Near crisis point"It's clear right now that we're not that many trading days away from a very, very severe crisis," Fiachra Maccana, head of equity research at West LB Panmure, told Reuters news agency. There are signs that the selling is luring bargain hunters back to the market. Overseas investors were net buyers of Japanese stocks last week after weeks of selling. "The steep drop in share prices was presumably seen as a buying opportunity by many investors," Barclays Capital Chief Economist Mamoru Yamazaki said in a report. Overseas investors bought 730.7 billion yen ($5.9 billion) more in stock than they sold. But that shift is not expected to become a trend. "Given the deteriorating investment environment and reduced risk-taking capacity of foreign investors amid falling U.S. share prices, however, the prospects of an uninterrupted flow of funds into Japan are doubtful," Yamazaki added. Other figures were less encouraging. New data showed that bank lending fell 4.8 percent in September, over a year ago, for the 57th month in a row of decline. Deflation package sped upMarket watchers are starting to fault the government for taking too long to outline its approach to dealing with the economy and the stock slide. Chief Cabinet Secretary Yasuo Fukuda hinted on Thursday that the government may speed up the delivery of a package to fight deflation. "The direction of it will be made clear gradually from this week through next week," he said at a press conference. Takenaka was due to meet Howard Baker, the U.S. ambassador to Japan, later on Thursday, though it was not clear whether they would discuss banks or the stock selloff.
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