Japan managed only to raise its head from its endless slump, before falling back into the same pattern. In May, the Bank of Japan finally lowered its forecast for economic growth this fiscal year from 2.1% to 1.5%, falling in line with other estimates. Masaaki Shirakawa, governor of the Bank of Japan, spoke of "downside risks" to the world's second largest economy. Profits in the private sector have been falling, and heavy government debt at 170% of gross domestic product means that tax cuts and any other stimulus of the economy look unlikely. Meanwhile, inflation at 0.9% is within the central bank's zero to 2% range, implying that the bank will not raise rates. The Bank of Japan held its key rate at 0.5% yesterday. The stock market is plummeting and about half of the country's companies are trading at less than book value. At a time when Chinese banks are forging ahead with joint ventures and foreign bank acquisitions, Japanese banks have been virtually absent, not least because they invested in structured products in a bid to boost their lack-lustre profitability. Those products are now toxic. Analysts are expecting more write-downs in second quarter results, due out as The Banker went to press.
展开▼
