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The Honolulu Advertiser
Posted on: Wednesday, October 23, 2002

Japan business owners hope to block curbs on lending

By Mayumi Otsuma
Bloomberg News Service

OSAKA, Japan — Small and mid-sized Japanese companies will urge the government to ensure the flow of credit as lenders write off some of their $418 billion of bad loans, said a senior official of a regional chamber of commerce.

UFJ Holdings Inc. and Mizuho Holdings Inc. led drops in Japanese bank shares on speculation their loans to problem borrowers may put them first in line to be seized by the government.

Bloomberg News Service

Prime Minister Junichiro Koizumi has pledged to resolve banks' bad loans by March 2005 and plans to speed disposals over the next six months.

Analysts say banks will probably withdraw loans from small businesses or stop lending to them, threatening to drive some into bankruptcy.

Ten chambers of commerce from across Japan will submit a petition to the government next month, said Nobuhiro Imatani, president of the Higashiosaka Chamber of Commerce and Industry in western Japan.

"We understand the government should speed up the write-offs of banks' bad loans, but it should take safety-net measures at the same time," Imatani said in an interview. "We want the government to understand viable companies and companies with competitive technology also face very severe situations."

Japan's plan to speed disposal of bad loans at UFJ Holdings Inc. and other banks could lop 0.5 percentage point from economic growth annually and push the jobless rate to 6.7 percent by 2005, a report by HSBC Securities (Japan) Ltd. said.

Finance Minister Masajuro Shiokawa, who was elected from the Higashiosaka area and is an adviser to its chamber of commerce, has said the government will try to expand loan guarantees for small companies. State-run lenders will also try to increase lending to small banks, Shiokawa said.

Many small businesses don't own collateral such as real estate to back their borrowing. Under government pressure to get rid of risky loans, lenders are trying to reduce lending that isn't backed by collateral.

"We hope banks will assess borrowers not based on collateral or guarantors but on the competitiveness of technology and future profitability," Imatani said.