IMF to Japan; open the books

["Ian Murray" <seamus2001@xxxxxxxx>]

[Whatever happened to private property in the means of information!
:-)]

Japan Resists IMF Look at Banks
Agency Urged to Delay Review of Bad Loans

By Paul Blustein
Washington Post Staff Writer
Saturday, September 1, 2001; Page E01


Japan is balking at allowing experts from the International Monetary
Fund to assess the state of its banking system, a sign of the mounting
tension between Tokyo and the IMF over the severity of Japan's
financial woes.

Hakuo Yanagisawa, Japan's financial services minister, yesterday
rebuffed an IMF request to send a team to conduct an in-depth review
of Japanese banks under a program aimed at strengthening financial
systems around the world.

"I want them to wait for the right time," Yanagisawa told a news
conference, according to wire service reports from Tokyo. Yanagisawa
asserted that while the Financial Services Agency was willing to
disclose information eventually to the IMF, "Right now it's a little
bit difficult" because the agency is short of manpower.

The rebuff is the latest in a series of clashes between the 183-nation
IMF and Japan, the institution's second-largest shareholder. At issue
is IMF concern that Japanese officials are underestimating the amount
of bad loans held by Japanese banks -- a recurrent problem during the
decade of stagnation that has beset the nation's giant economy.

Japanese officials are understandably sensitive to criticism about
their economic stewardship, because the nation's financial system has
been looking exceptionally shaky lately. The Nikkei stock index fell
2.1 percent yesterday to 10,713.51, hitting its third consecutive
17-year low. Plunging share prices are of much greater concern in
Japan than in the United States because Japanese banks hold hundreds
of billions of dollars worth of stock and depend on their stock market
gains to help protect them against loan losses.

Although Prime Minister Junichiro Koizumi has proclaimed a cleanup of
the banking industry's problems to be a top priority, his government
has bristled at some of the IMF's suggestions and observations on the
subject.

In July, an IMF report evoked irritation in Tokyo by warning that
Japanese banks are so weakened by nonperforming loans that the
government may need to inject billions of dollars in fresh taxpayer
funds into them -- a move that Koizumi's cabinet maintains is
unnecessary now.

And on Aug. 20, following release of the IMF's annual assessment of
the Japanese economy, Shoji Mori, commissioner of the Financial
Services Agency, blasted the fund for relying on calculations by
private financial analysts concerning the size of the bad-loan
problem. "It is irresponsible of an international organization of
authority to use what market analysts said," Mori said. Among other
things, he was referring to the IMF's citation of estimates by
analysts that Japanese banks might have to take an additional $166
billion to $250 billion in reserves for loan losses above what the FSA
projects.

Now the two sides are at loggerheads over the IMF's plans to include
Japan in a list of countries whose banking systems will be scrutinized
under the Financial Sector Assessment Program, an initiative launched
in the aftermath of the global financial crisis of the late 1990s in
the hopes of helping countries avoid similar bouts of instability.

The program, a joint venture with the World Bank, was started in May
1999. It first examined a dozen countries' banking systems on a pilot
basis, including Canada, South Africa and El Salvador. In February the
IMF agreed to expand the program along originally planned lines to
include about two dozen countries a year, and its executive board
decided to put a higher priority on "systemically important
countries" -- that is, nations whose banking systems were big enough
to pose dangers to the rest of the global economy.

The IMF "hopes that the FSA will accept our request" to allow the
fund's banking experts to conduct an assessment, a fund spokeswoman
said yesterday, adding that the matter will be discussed when
Yanagisawa meets with IMF Managing Director Horst Kohler next week.

Other IMF officials were more pointed. Bloomberg news quoted Shunichi
Fukushima, an economist in the IMF's Tokyo office, as saying, "People
are very skeptical about the Japanese authorities' ability to assess
nonperforming loans."