Japan Commercial Banking Report Q1 2008 Available Now

DUBLIN, Ireland--(Business Wire)--
Research and Markets
(http://www.researchandmarkets.com/reports/c88345) has announced the
addition of "Japan Commercial Banking Report Q1 2008" to their
offering.

The "Japan Commercial Banking Report" provides independent
forecasts and competitive intelligence on Japans commercial banking
industry.

From Q108 we will be calculating the Commercial Banking Business
Environment Rating (CBBER) for each of the countries surveyed by BMI.
This will permit a more systematic and comprehensive comparison of the
conditions within the banking industries of the various countries than
was possible in the past. For each country, it will also facilitate a
comparison of the conditions within the banking sector and conditions
prevailing in other sectors.

Japan's overall CBBER at 75.0 is high, the third highest of the
countries in the Asia-Pacific region that are surveyed by BMI. This
score is underpinned by high scores in all the major components of the
rating. Japan's score is particularly underpinned by the high score of
76.3 on the heavily weighted banking market elements of the limits to
potential returns element. This, in turn, reflects both the large
scale and high degree of sophistication of the Japanese banking
system. In particular, the banking market structure element of the
limits to potential returns have a higher although roughly comparable
score to the country element (i.e. 76.3 versus 70.6). On the other
hand, the banking market elements of the risks to the realisation of
potential returns is considerably lower than the country risk rating
(i.e. 66.7 versus 84.7). That is, although the banking sector is well
positioned within what is admittedly a weak economy, it, rather than
the economy more generally, is also the primary locus of risks to its
own further development. This is because the banking system remains
fragmented and is losing market share to its competitors in a very low
domestic interest rate environment.

Japans economy faces a number of headwinds in 2008 that have
prompted us to cut our growth forecast to 2.0% from 2.5% previously.
Factors constraining the economy include political uncertainty, a
weaker external environment, subdued consumption, and the prospect of
higher sales taxes to rein in Japans massive fiscal deficit and debt
burden amid an ageing population.

Japans economy will begin 2008 on a weaker note than 2007, owing
to a number of external and domestic factors. Japans relatively robust
growth in recent years has been boosted by exports, which have
benefited from a weak yen. However, we envisage slower growth in the
US, China and the Eurozone in 2008, which will have the effect of
sapping demand for Japanese exports. In addition, we also forecast the
yen appreciating to JPY108.00/US$ at the end of 2008 - with the
possibility of stronger gains in the meantime - from JPY112.00/US$ at
present, which could reduce the competitiveness of Japanese goods.

Going forward, we caution against the notion that Japan can
decouple from US growth. Although China is poised to overtake the US
as Japans biggest export market in 2007 for the first time in modern
history, the truth is that many Japanese items sent to China are
machine components assembled into finished products at local factories
for re-export to the US

Japans economy is also experiencing weak domestic demand (personal
consumption generates 55% of GDP). Strong Japanese corporate profits
have generally failed to translate into higher wages because over the
past decade or so, Japanese companies have been shedding staff and
replacing them with temporary workers, who are paid less than their
full-salary predecessors, constraining personal consumption. Going
forward, domestic demand may well suffer another blow if the
government proceeds with raising the consumption tax rate to finance
increasing social security costs. Certainly, the government needs the
extra revenues. Japan has run nominal fiscal deficits in excess of
6.0% of GDP in recent years, as a legacy of the lost decade of the
1990s, when massive government spending was used to prop up the
economy. Consequently, its national debt burden, at JPY834trn
(US$7.4trn), now exceeds 160% of GDP - virtually the highest
debt-to-GDP ratio in the world. In addition, Japans population is
simultaneously ageing rapidly and shrinking, meaning that more money
will have to be spent on looking after the elderly over the coming
decades. As such, Japan needs to find all the revenues it can muster.
At 5.0%, Japans sales tax is still lower than many developed states,
meaning that the government has leeway to raise it. Overall, the above
factors mean that Japan can no longer rely on fiscal pump priming
(i.e. public works projects) measures to bolster the economy. The Bank
of Japans long-running quest to normalise monetary policy by raising
interest rates will also run into difficulties in 2008, owing to
several global and domestic factors. As regards the former, weaker
economic growth in the US and Eurozone is likely to reduce demand for
Japans exports, thus putting its economy under pressure. Domestically,
for all the BoJs talk of the need to pre-empt inflationary pressures,
Japan is barely out of deflation. Core CPI was 0.1% y-o-y in October
2007, marking the first positive reading in 10 months. The fact that
Japanese inflation has remained so low even amid record oil prices
underscores the strength of deflationary forces at work. Although we
see Japanese core CPI picking up to 0.5% in 2008, this hardly merits
aggressive rate hikes.

Topics Covered:

Executive Summary

Key Issues

Changes to the Commercial Banking Forecast

International Context

Per-Capita Deposits

Table: Comparison Of Per-Capita Deposits, Late 2006 (17

Macroeconomic Trends and Developments

Banks' Bond Portfolios

Methodology

For more information, visit
here

Research and Markets
Laura Wood, Senior Manager
Fax: +353 1 4100 980
press@researchandmarkets.com

Copyright Business Wire 2008