Jan 28th - SBI Shinsei Bank to Repay 100 Billion Yen in Public Funds
Complete Repayment and Go Public as Early as Next Fiscal Year - Closing the "Last Chapter" of Public Fund Injection
This translation is AI-generated and may contain errors.
📰 Today's News
Today's topic is about SBI Shinsei Bank's repayment of public funds.
💹 Market
☝️ Reason for Front Page
SBI Shinsei Bank has set a plan to repay 100 billion yen in public funds, with prospects of completing repayment and going public as early as next fiscal year. This marks the expected full repayment of public funds injected into major financial institutions in response to the bubble economy collapse, after a quarter of a century.
📚 Table of Contents
Background of the Bubble Economy and Financial Crisis
Significance and Debate of Public Fund Injection
China Facing Similar Issues
🪅 Key Points
SBI Shinsei Bank plans to repay 100 billion yen in public funds, aiming for full repayment and public listing next fiscal year
Major financial institutions set to complete repayment of public funds injected in response to the post-bubble financial crisis
Stabilization of the financial system and completion of public fund repayment mark a turning point for the Japanese economy
🏦 Background of the Bubble Economy and Financial Crisis
The collapse of the bubble economy is a traumatic event for a certain age group, and the Nikkei is enthusiastically featuring it on the front page as the "end" of this era comes into view.
Let's explain what a bubble is and more details below.
A bubble economy refers to a phenomenon where asset prices rise rapidly, detached from the real economy.
The key point is "detached from the real economy," meaning it lacks foundation and will eventually collapse.
In Japan, the bubble occurred in the late 1980s, with stock prices and land values soaring to abnormal levels.
During this period, the Japanese economy enjoyed unprecedented prosperity, with optimistic views like "land myth" and "ever-rising stock prices" prevailing.
However, when the bubble burst in the early 1990s, the situation changed dramatically.
Stock prices plummeted and land values fell simultaneously, leaving many companies and individuals with massive debts.
Financial institutions, in particular, which had made large-scale loans using real estate and stocks as collateral, were left with enormous non-performing loans.
This non-performing loan problem became the main cause of the financial crisis.
Banks tightened lending or recalled loans, worsening corporate cash flow.
Furthermore, the successive failures of some financial institutions shook the credibility of the entire financial system.
This was the financial crisis triggered by the so-called bubble collapse.
Due to this chain of negative effects, the Japanese economy entered a long period of stagnation known as the "Lost 20 Years" (sometimes referred to as 30 years).
💰 Significance and Debate of Public Fund Injection
As a measure to address the financial crisis, discussions began on injecting public funds (essentially tax money) into financial institutions.
This was based on the recognition that stabilizing the financial system by protecting financial institutions was essential for overall economic recovery.
The collapse of financial institutions could have wide-ranging negative impacts, not only causing depositors to lose assets but also halting corporate lending, leading to economic stagnation and potentially disrupting the payment system.
When deciding on public fund injection, the first question was whether it was appropriate to rescue private companies at taxpayers' expense.
Concerns were also raised about "moral hazard," the possibility of encouraging irresponsible behavior by financial institutions relying on public support.
There were also discussions on how to hold the management of financial institutions receiving public funds accountable, how to supervise after injection, and how to plan for repayment.
On the other hand, the importance of preventing the collapse of the financial system was emphasized.
The view that a sound financial system was essential for Japan's economic recovery and that long-term economic stabilization should be prioritized over short-term fiscal burdens gained support.
As a result, it was decided to inject public funds while establishing strict conditions and supervisory systems.
This decision became an important policy judgment aimed at balancing the stabilization of the financial system and economic recovery.
🤔 China Facing Similar Issues
《2-Minute Front Page (Nibu-ichi) Perspective》
In China's housing bubble collapse, there are also discussions about the pros and cons of government fund injection, which reminds me of Japan's bubble collapse.
I've heard that China might be studying how Japan debated and responded to its bubble collapse.
While Japan's handling of the bubble collapse is often described as a "failure," I believe there are some aspects that could be useful as reference.
📰 Other Front Page News Today
The statement by a mid-sized steel company executive at the end, "The era of 'just borrowing more than needed is over,'" seems to sum it all up. When interest rates are low, the priority is to maintain ample cash on hand, but as interest rates rise and funding costs increase, more detailed considerations about how much to use for what purpose become necessary, which is obvious but important.
Exterior renovations can be quite expensive. While it's mentioned that homes can be used as collateral, I wonder if loans would still be available for cases where the asset value is quite low.
I believe the phase where a president's resignation is enough has long passed. While Fuji TV is currently under scrutiny, if there's a similar atmosphere or custom in the industry, it wouldn't be surprising to see second and third "Fuji TVs" emerge, which is concerning.
✉️ P.S.
In today's article, although it's mentioned at the end that "regional banks are still not done," I couldn't help but chuckle while reading as I could sense the Nikkei's excitement coming through.