The Bankwatch

Tracking the consumer evolution of financial services

A lesson from Japan in management of toxic assets planning

Christian Caryl points out just how little Japan is both misunderstood and underestimated, particularly with regard to the 1989 bubble economy.  Feel free to read at your leisure.

Mr  Koizumi government too charge in getting the banks to clean up their act, and after that the economy responded with remarkable speed. By contrast, the present U.S. slump is the result of a culture of financial profligacy that enmeshed consumers and homeowners as well as major financial institutions

This lesson is one that must be considered as the PPPIP (Geithner) plan is implemented in the US, and European governments should take note as they waffle on the point.

Think Again: Japan’s Lost Decade | Foreign Policy

Policymakers hobbled by a dysfunctional political system dawdled for years when it came to cleaning up “zombie” companies (bankrupt in all but name) and getting financial institutions to dispose of toxic assets. That failure to take decisive action may have shaved points off Japan’s overall growth rates and ended up leaving the country saddled with enormous public debt (peaking at 175 percent of GDP by one recent measure). Yet, a push to force banks to shed their nonperforming loans under the government of Prime Minister Junichiro Koizumi starting in 2001 had notably positive effects on growth.

Written by Colin Henderson

April 4, 2009 at 12:05

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