Edition:
United States

Takahiko Wada

Japan's regulatory chief urges BOJ to consider impact of easing on banks

Aug 26 2019

TOKYO The Bank of Japan is responsible for deciding whether to ramp up stimulus to support the economy, but should weigh the impact its monetary policy will have on the banking sector, the country's top financial regulator said on Monday.

Japanese bank lobby head warns BOJ against deepening negative rates

Aug 06 2019

NAGOYA, Japan A Japanese banking lobby head warned of the dangers to the industry if the central bank topped up its already extreme monetary stimulus or deepened negative interest rates, amid signs authorities may have to do just that to support growth.

Japanese bank lobby head warns BOJ against deepening negative rates

Aug 06 2019

NAGOYA, Japan A Japanese banking lobby head warned of the dangers to the industry if the central bank topped up its already extreme monetary stimulus or deepened negative interest rates, amid signs authorities may have to do just that to support growth.

Former Japan central banker warns Facebook's Libra may undermine monetary policy

Aug 02 2019

TOKYO Central banks may see the impact of their monetary policies diminish significantly if Facebook's Libra cryptocurrency becomes widely used in their countries, a former Bank of Japan executive warned on Friday.

Japan to lead development of SWIFT network for cryptocurrency: source

Jul 18 2019

TOKYO Japan's government is leading a global push to set up an international network for cryptocurrency payments, similar to the SWIFT network used by banks, in an effort to fight money laundering, a person familiar with the plan said on Thursday. | Video

Japan's Shinsei mulls Asia investment, but lender Suruga not M&A target: CEO

Jun 12 2019

TOKYO Japan's Shinsei Bank is looking to invest in a non-bank financial firm at home or in Asia, its chief executive said, ruling out the possibility that local lender Suruga Bank could be a target following an announcement of a tie-up last month.

Regional bank in Japan battles ultra-low rates with wine bar, sea urchins

May 15 2019

SHIMONOSEKI, Japan As years of near-zero interest rates in Japan make traditional lending barely profitable, one regional bank is seeking to drum up business through less conventional enterprises, from opening wine bars to helping local fishermen farm sea urchins.

RPT-In hunt for yield, Japan's banks snap up leveraged U.S. debt

Apr 10 2019

(Repeats for Asia morning readership. No change to text.) * CLO investments among top Japanese banks increase sharply * They buy only senior tranches, say risk managed * Analysts expect holdings to increase amid lack of alternatives * Similar products trigger of financial crisis decade ago By Takahiko Wada TOKYO, April 10 Japanese banks have stepped up investments in highly illiquid, securitised loans, mostly in the U.S. market, as it becomes increasingly difficult to earn decent interest income from conventional products like government bonds. A Reuters survey showed some of Japan's biggest banks, led by Norinchukin Bank , have nearly doubled their investment in collateralised loan obligations (CLOs) in the nine months to December. While the increased exposure brings back memories of similar, complex products made up of subprime mortgages that triggered a global financial crisis a decade ago, banks say they are managing risks carefully. Moreover, analysts expect institutions to continue buying such assets as Japanese investors seek returns amid a zero interest rate environment at home and a shrinking pool of stable, high yield income abroad. "We are controlling risks and returns from our major asset classes -- bonds, stocks and credit products -- by looking at their correlations and with proper checks by our risk control desk," said a spokesman for the Norinchukin Bank, by far the biggest CLO buyer among Japanese banks. CLOs are essentially an investment in a pool of loans to high-risk, low-credit companies. But not all investors share the same return and risk. Those who invest in the "equity" part, typically up to 10 percent of the entire pool, enjoy very high yields but have to take losses from borrowers default first. When defaults increase more than the equity investors can absorb, investors in "junior" tranches are next in line to suffer losses, followed by "mezzanine" tranche holders. The rest, typically about 60-70 percent of the total pool, are called "senior" tranches and normally come with AAA credit ratings because their repayments are at risk only when the other three classes fail to cover losses. That means they suffer losses only when more than 30-40 percent of loans default, an unlikely scenario even under a severe economic downturn, at least based on historical records. All the Japanese banks Reuters contacted said they have bought only AAA tranches. Senior CLOs are attractive because they typically yield about 100 basis points or more above U.S. Treasuries despite their high credit ratings. The hefty yield spread is the premium issuers need to pay investors for holding illiquid assets. "As long as we can earn appropriate spreads, we plan to deal with CLO issues that will be resilient to risks," said spokesman at Sumitomo Mitsui Trust Holdings. The size of securitised debt market shrank after the crisis. In the United States, it fell from over $1 trillion to around $600 billion in 2013. But since then it has gradually recovered to around $800 billion. Market players say CLOs today are considered less risky than the notorious collateralised debt obligations, or CDOs, which caused a massive market shock in 2007-08 after subprime borrowers' default jumped. Regulations have become tighter since then and borrowers in CLOs are companies, whose financial records are easier to analyse for investors, rather than thousands of subprime mortgage borrowers. Still, analysts say they cannot rule out the possibility that CLO prices would fall if an unexpected economic downturn prompted investor panic. "When the economy deteriorates, we could have a vicious cycle of rising funding costs increasing defaults further," said Yukichi Shimosato, market analyst at SMBC Nikko Securities. "And because the CLO market is illiquid, if investors pull out some money, the price of CLOs could fall to extreme levels." Responses from Japanese banks to Reuters' questions about their holdings of U.S. CLOs: Bank Mar 2018 Dec 2018 (billion yen) (billion yen) Norinchukin Bank* 3,800 6,800 MUFG Group** n/a 2,500 Japan Post Bank 496 1,006 Mizuho Bank 400 500 Sumitomo Mitsui 265 305 Trust Sumitomo Mitsui n/a 77 Bank*** *Figures include European CLOs **No March 2018 figure provided. MUFG said outstanding no higher than in 2015 ***No March 2018 figure provided. Sumitomo Mitsui Bank said no major change since March 2018 (Additional reporting and writing by Hideyuki Sano; Editing by Sam Holmes)

In hunt for yield, Japan's banks snap up leveraged U.S. debt

Apr 10 2019

TOKYO Japanese banks have stepped up investments in highly illiquid, securitised loans, mostly in the U.S. market, as it becomes increasingly difficult to earn decent interest income from conventional products like government bonds.

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