Japan's banks have worked hard to recover

Of the top seven banks, Mizuho - the world's largest bank by assets - and four others all reported solid figures.

Mizuho's 407bn yen profit ($3.6bn; $2bn) followed a 2.4 trillion yen loss in 2002-3.

But UFJ, the number four "megabank" in Japan, said it had made a loss as heavy bad debts continued to weigh it down.

UFJ reported a loss of 402.8bn yen, making three straight years of losses.

Its bad debts rose to 3.95 trillion yen, up 6.5% in six months, and its president has announced he will resign.

And Resona Holdings, the fifth-biggest bank, also recorded heavy losses as its efforts to clean up its balance sheet ate into its bottom line.

Resona, effectively nationalised in 2003 as its bad-debt losses mounted, said losses doubled in the year to March 2004 to 1.66 trillion yen.

Burden

In contrast, Sumitomo Mitsui made a group net profit of 560.8bn yen and Mitsubishi Tokyo, the other "megabank", earned 560.8bn yen.

Mitsui Trust and Sumitomo Trust - the smallest of the top seven - reported profits of 51bn yen and 80bn yen.

These solid results seem to be evidence that years of groaning under the weight of trillions of yen in bad debts accumulated during the free-spending 1980s may be coming to an end.

The debts were secured against shares and property, both of which crashed in value during the 1990s.

That wrought shocking damage to Japanese banks, whose balance sheets were also heavily dependent on cross-holdings of allied companies' shares for their asset base.

Ever since, they have struggled to write off debts under government pressure, although criticism has frequently been levelled at both sides for failing to act with sufficient speed and rigour.

Share gain

Finally, the efforts appear to be paying off.

Even Resona's huge loss is largely the result of a 1 trillion yen increase in spending on reducing the loans, which are down to 1.86 trillion yen from 2.88 trillion yen.

But the 2003-4 turnaround is also the result of a resurgence on the stock market, up 47% over the year.

A windfall tax refund of almost 200bn yen from Tokyo's city government also helped support the results.