FT.com / World / Asia-Pacific Monday Jan 5 2004. All times are London time. Roger Bove Edit Profile Take a tour Log out Home World US UK Europe Asia-Pacific Middle East & Africa Americas International economy Brussels briefing News headlines News in depth Business Markets Markets data & tools Industries Lex Comment & analysis Technology Management Your money Arts & Weekend Sport Jobs & classifieds In today's FT FT Reports Creative Business FTfm FT-IT World reports Business reports News in depth Rebuilding Iraq WMD guide Science briefing China Terror Columnists Martin Wolf Lucy Kellaway Philip Stephens Quentin Peel Lombard Gerard Baker Amity Shlaes World / Asia-PacificPrint article | Email Japan's rural lenders 'need big input of state funds' By David Ibison in Tokyo Published: January 5 2004 4:00 | Last Updated: January 5 2004 4:00 The severity of the problems facing Japan's regional financial sector will be highlighted today with the release of a report that says the country's rural credit associations need a Y1,500bn ($14bn, €11bn, £7.8bn) injection of government funds. Fitch, the credit rating agency, analysed 314 shinkin banks, credit associations with total deposits of Y102,000bn, the third largest deposit-takers in Japan after city banks and large regional banks. The shinkin are non-profit organisations designed to provide credit to local communities. Like other Japanese financial institutions, they have been undermined by unwise lending and economic stagnation. Fitch concluded 153 of the 314 shinkin with deposits of Y49,000bn are weak and require an injection of funds. The report marks the beginning of a year when regulatory attention will shift from Japan's five big banks to regional financial institutions such as local banks, credit associations and agricultural co-operatives. Regional financial institutions' deposits exceed those of the big banks, highlighting the need for revitalisation and the development of a functioning credit allocation system. Total deposits at the big banks in March 2002 were Y226,000bn compared with about Y438,000 at other financial institutions, according to the Shinkin Central Bank. "A healthy shinkin sector would constitute a small but essential part of the structural reform that is still necessary if Japan's tentative economic recovery is to spread," the report states. Shinkin are regulated by the Financial Services Agency, the banking regulator, which works with the Shinkin Central Bank in overseeing the sector. The SCB has set up a fund to revitalise the shinkin, but it now contains only Y17bn. "Unless the authorities inject substantial public funds into the shinkin sector, the weaker players will be unable to recover and further failures will be unavoidable," the report states. The number of shinkin has dropped already from 401 in 1998 to 314 at present. Fitch forecasts intense consolidation in the sector with the number of shinkin falling from 314 to around 200 as a result of mergers, acquisitions or liquidations. The report makes clear, though, that the risks of a systemic financial crisis are remote. "The most interesting result is not that just under half of the 314 institutions analysed are considered to be poor, but that a slight majority are viewed as basically sound," it says. EMAIL THIS PRINT THIS MOST POPULAR Related stories East Asia is going to be an economic dynamo Jan 05 2004 19:35 The dollar gets off to a bad start Jan 05 2004 16:39 Asian stock markets make positive start to year Jan 05 2004 13:21 Seven Eleven enters northern China market Jan 05 2004 10:43 Japan signals intention to prevent rise of yen Jan 05 2004 10:06 Tokyo shares close higher on first day of trade Jan 05 2004 09:09 2004 to be difficult as recovery fades Jan 05 2004 04:00 Asahi Breweries in China venture Jan 05 2004 04:00 Japan's rural lenders 'need big injection of state funds' Jan 05 2004 04:00 Honda to unveil pick-up for US Jan 05 2004 04:00 = requires subscription to FT.com Search & quotes NewsQuotes Power search My portfolio Related stories East Asia is going to be an economic dynamo The dollar gets off to a bad start Asian stock markets make positive start to year Seven Eleven enters northern China market Japan signals intention to prevent rise of yen Email & tools News alerts News summaries Personal office Download news ticker Currency converter Research tools Analyst reports FT Research Centre Free annual reports Market research Growth companies D&B business reports HomeWorld | Business | Markets news | Markets data & tools | Industries | Lex | Your money | Comment & analysis | Reports | Arts & Weekend | Sport | Jobs & classifieds | In today's FT | Media inquiries | Site servicesContact us | Help © Copyright The Financial Times Ltd 2004. "FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms | Advertising | Corporate