Japanese bank shares slide on political concerns

Japanese bank shares slide on political concerns

Tokyo: Shares of Japanese banks fell on Wednesday after incoming financial services minister Shizuka Kamei said he would push for a moratorium on some loan repayments, cutting revenue for fragile lenders.

Kamei, a 72-year-old veteran politician and strong opponent of privatisation, told reporters on Tuesday he favoured a three-year moratorium on the repayment of loan and mortgage principal.

The policy would be aimed at helping individuals and smaller companies hit by the credit crisis, he said.

“Financial institutions are not fulfilling their responsibilities. (Finance) is like blood flowing through the body and we want to make sure it reaches even tiny blood vessels," he told a group of reporters in Tokyo.

“We want to quickly work on a moratorium for exempting small and medium-sized businesses and individuals from repaying loans and mortgages for about three years."

Investors took his stance as a negative for lenders in the world’s second-largest economy.

“This is leading to selling of bank shares," said Norihito Fujito, general manager in the investment research and information division at Mitsubishi UFJ Securities.

Tokyo’s index of bank stocks fell 1.9% by the close of trade, underperforming the benchmark Topix index, which ended little changed.

Local banks, which do much of their lending to smaller firms, were among the hardest hit. Shares of Kagawa Bank fell 7% to ¥360, while Tokushima Bank dropped 6.2% to ¥376.

Mitsubishi UFJ Financial Group, Japan’s largest bank by assets and market value, fell 1.7%.

Although Kamei served stints as both transport and construction minister, he has little financial experience. He is a harsh critic of the market-oriented policies introduced by former prime minister Junichiro Koizumi.

Much of his initial comments have focused on plans to dismantle Koizumi’s privatisation efforts, which were lauded by investors.