It is true that the recovery in the banking index, like that of the Nikkei generally, marks only a tentative pulling away from the very low levels reached after a prolonged market crash. But in the banks' case, the few positive signs emerging are dwarfed by the seemingly immovable mountain of the banking systems' bad debt problems. There is little in the current pick-up, assisted by an easing of the painfully strong yen, that looks capable of shifting for the better the fundamentals of a sector prostrate under debts officially estimated at pounds 355bn. The real extent could well be much worse.
To the extent that the uplift in share prices is justified, it is derived from the widespread conviction, probably justified, that the Japanese government will not risk a systemic crisis. Allowing the Cosmo credit union to go under, in a highly managed way, was one thing. It served as a salutary reminder of just how fragile the situation is. But the authorities are unlikely to want to risk bigger shockwaves.
For the moment, the pressure on them to act more decisively has been eased slightly by market developments. But these amount to little more than peripheral improvements in the banks' fortunes. Trading profits have risen with falling interest rates and there have been capital gains from the strengthening bond markets.
It is hard, however, peering further into the future, to see where the good news will come from to sustain this impression of inching back from disaster. Mitsubishi Bank is planning to launch a $2bn convertible bond issue to bolster its balance sheet. But not many of its crippled rivals, not to mention the sorry ranks of smaller institutions, can hope to emulate that.
So far the Ministry of Finance has limited itself to shoring up the pillar of faith with statements that it will, if need be, underwrite the banks should they run into liquidity problems in the inter-bank market. There have been hints of a master plan nearing completion for the rescue of the banking system, but nothing more concrete than that. Should the current recovery falter, and the breather from the weaker yen come to an end, then the time will have come for the government to demonstrate the decisive crisis-management that has been lacking so far. That time may not be too far off.