Fallout: The Financial Crisis

It’s time for Japan to cash in

Scott Tong Oct 13, 2008
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Fallout: The Financial Crisis

It’s time for Japan to cash in

Scott Tong Oct 13, 2008
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TEXT OF STORY

Scott Jagow: Japanese banks are buying up pieces of failing U.S. ones. Like Morgan Stanley — there’s a deal that comes out tomorrow on that. Wall Street needs the capital, and if it’s one thing that Japanese banks actually do have, it’s cash. From Tokyo, Marketplace’s Scott Tong reports.


Scott Tong: Downtown Tokyo buzzes with talk of banking deals. Mitsubishi Financial is buying stakes in Morgan Stanley. Domestic bank Nomura acquired parts of bankrupt Lehman Brothers, and rumor has it the next targets are Goldman Sachs or AIG. So why are Japanese banks among the last financial firms standing?

Keiichiro Kobayashi is with a government economic think tank. He says banks here suffered their own bad loans in the 80’s and 90’s, so they learned not to get adventurous.

Keiichiro Kobayashi: Japanese banks suffered for 15 years. So they become very risk-averse.

Appropriately conservative? Maybe.

Economist Richard Jerram is with Macquarie Securities:

Richard Jerram: It’s questionable whether their non-participation was because they were smart or because they were lucky. Basically it was simply a question of timing.

Jerram says when the U.S. banks were getting drunk, the Japanese were still hung over.

Jerram: They’d only just realized they had enough capital and were starting to look for better returns just as the U.S. started to blow up. And if it had happened a couple years later, they would probably have been more exposed than they ended up being.

Today, Japanese banks sit on half a trillion dollars in cash. They’re investing in struggling U.S. banks. One Mitsubishi UFJ Financial executive calls it the “chance of a lifetime” to buy a piece of Morgan Stanley.

So is Wall Street under threat of foreign ownership? Jeff Kingston at Temple University’s Tokyo Campus says no. He says this time, the Japanese may end up passive, minority investors — or simply bad investors.

Jeff Kingston: We don’t really know the extent of this financial crisis, and one worries that the Japanese banks and investors may be piling in a bit too hastily.

And there’s no sense in Japan that they want to barge in and take over the financial universe. One analyst says the Japanese banks have neither “the greed nor the drive” to do it. Perhaps the best they can offer the world is their valuable cash — to put up and then shut up.

In Tokyo, I’m Scott Tong for Marketplace.

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