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 | | Tuesday, 15 January, 2002, 11:51 GMT Megabank opens in Japan  Analysts have urged banks to shed their bad loans Japan's UFJ Bank, the country's fourth largest lender, started operations on Tuesday, promising to shed a mountain of bad loans. The bank is planning to write off 2,000bn yen ($15bn, �11bn) in bad loans in the year to March 2002. The bank's bad loans totalled 2,400bn yen last September. The UFJ's plans are seen as being in line with the Japan's banking reform guidelines promoted by Prime Minister Junichiro Koizumi. Mr Koizumi has urged banks to reduce the amount of bad loans to levels where they can be covered by operating profit within two or three years. The UFJ Bank is a commercial unit of UFJ Group, created last April through a merger of Sanwa, Tokai and Toyo Trust and Banking Corporation. Dealing with bad loans Faced with the high cost of dealing with problem loans and huge losses on its stockholding due to a plunging stock market UFJ is struggling to keep its capital from eroding further.
The group announced on Tuesday it would transfer 1,000bn yen from capital reserves into funds. Another 1,000bn yen transfer of UFJ's commercial banking unit would be decided by the end of March. "We will place our top priority on disposing of bad loans to make this bank a youthful and energetic bank," Masahi Teranishi, UFJ Bank president, said. Saving supermarkets One immediate headache is to help struggling Daiei, Japan's biggest supermarket chain, which owes UFJ more than 800bn yen.
The bank is to work with two other creditors, Mitsui Banking Corporation and Fuji Bank, over advising Daiei on its future direction. Mr Teranishi did not exclude the possibility of a complete writing off Daiei's debt and promised to help the company "not to fail". Move swiftly to survive Analysts say UFJ and other Japan's banks must process bad loans swiftly to survive the economic slump which has pushed the country into recession for the third time in a decade. "The banks must reduce bad loans or they risk going under," Hironari Hayashi, banking analyst in Shinko Securities, said "They have repeatedly expressed their intention to get rid of bad loans. A question now is how and if they will do it." Shares in UFJ ended the day flat at 269,000 yen. | | See also:  Top Business stories now:  Links to more Business stories are at the foot of the page. | ||||||||||||||||||||||||
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