Japan

Japan Post Bank Co. said it would be cautious about future investment in bundled corporate loans after raising holdings last quarter, as financial authorities increase scrutiny of the practice, Bloomberg News reported. The postal savings giant boosted its holdings of collateralized loan obligations by 15% from June to 1.52 trillion yen ($14 billion) as of Sept. 30, an earnings presentation showed Thursday.

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SoftBank is tightening governance at companies it backs as the Japanese conglomerate and its $97bn investment powerhouse try to limit the outsized control of start-up founders and restore confidence in their bets following the near collapse of WeWork, the Financial Times reported. The Tokyo-based group is expected to outline tougher governance standards and restrictions on dual-class share structures on Wednesday as it takes a multibillion-dollar writedown because of bad bets on investments such as the US-based office-sharing group, said people briefed on the plan.

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Japan’s financial system is becoming more susceptible to the effects of financial stress abroad, the Bank of Japan has warned, as stagnant returns at home prompt its lenders to ramp up their exposure to US leveraged loans, the Financial Times reported. In its semi-annual Financial System Report, the central bank said that the ratio of overseas to domestic loans at Japanese banks had reached a record high, as the banks fill the gap in international markets left by retreating European rivals.

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Japan’s regional banks, desperate to shore up waning earnings, are making risky bets that could blow up in the next economic downturn. In search of returns squeezed by negative interest rates, local lenders have been boosting real-estate and small-business loans that led bad-debt costs to triple last fiscal year, Bloomberg News reported. And with their holdings of Japanese government bonds falling to about half the levels of five years ago, they are increasing exposure to foreign assets.

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The brokerage arm of top Japanese lender Mitsubishi UFJ Financial Group will cut about half of its staff in Asia outside of Japan in a restructuring to be finalised as early as Wednesday, two people familiar with the matter said, Reuters reported. Mitsubishi UFJ Securities staff in Hong Kong, Singapore and Australia will be cut to fewer than 100 people from around 180 now, two people said, declining to be identified because the information has not been made public. Sales and trading will be heavily impacted, while debt capital markets will remain largely intact, they said.

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Troubled Japanese automotive supplier Akebono Brake Industry said Wednesday it has reached a deal with creditors to wipe away 56 billion yen ($518 million) in debt as part of a restructuring that will dispose of six factories, Nikkei Asian Review reported. The sum represents half of Akebono's bank debt and helps pave the way for a turnaround for the supplier to General Motors, Toyota Motor and Nissan Motor. Banks agreed to the loan forgiveness as well as the turnaround plan during a creditors meeting held Wednesday in Tokyo.

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The Bank of Japan is growing more open to the idea of cutting short-term interest rates deeper into negative territory, responding to global risks that are forcing other central banks to cut rates, said people familiar with the bank’s thinking, The Wall Street Journal reported. If the bank were to do so, however, it would look for ways to avoid sharp declines at the longer end of the yield curve, the people said.

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Japan’s Topix index slumped, wiping out this year’s advance, after the yen climbed to its highest since March last year on global trade concerns and political uncertainty, Bloomberg News reported. The benchmark measure fell 1.2% Tuesday, resuming trade after a three-day weekend. It is down 0.5% year-to-date and one of the worst performers among the 24 developed markets tracked by Bloomberg. The yen maintained gains after rising 1.1% against the dollar over the past four sessions and is trading around 105.28 to the dollar.

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Japanese Banks Are Circling the Drain

Banking in a country where almost nobody defaults sounds easy. For Japan’s lenders, it is anything but. After almost three decades of near-zero, zero, and now negative interest-rate policies, Tokyo has pushed its banking system to its limit, The Wall Street Journal reported. The country’s smaller lenders in particular are facing an existential threat to their business models. Located in aging and shrinking prefectures, they lack the ability to increase fee-related incomes that major banks can raise. Japan has too many banks, and consolidating them into larger players will buy time.

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Nissan Motor Co.’s prospects are getting bleaker by the quarter, with the Japanese automaker forced to shed 12,500 jobs and reduce production capacity by 10% as its aging lineup weighs on profitability amid a global slump in car demand, Bloomberg News reported. In the 250 days since the arrest of former Chairman Carlos Ghosn for alleged financial crimes, focus has shifted to the deteriorating business and the ability of Ghosn-protege-turned-accuser Hiroto Saikawa to revive the Yokohama-based company.

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