The Samurai Succumbs

They still call it a crisis; but its catastrophic consequences deserve more than just being called that. With liberalization proving to be a gateway for cheap financing, Japanese banks felt ignored and quantity became a priority over quality. The quality of loan portfolio declined and banks started getting into riskier segments like real estate. Eventually, in 1998, the amount of bad loans increased to a monstrous 3.8% of the total loans, and a staggering 11% was on the borderline to be stamped as ‘bad’, forcing the Japanese government to intervene. Around 7.5 trillion yen were pumped into the system for recapitalising 15 major banks. In reality, this Japanese banking sector crisis had a more devastating role to play in the Asian crises.

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Source IIPM-Editorial,2006