Japanese banks have debt ratings downgraded

FIVE of Japan's biggest banks have had their long-term debt ratings downgraded, reflecting problems caused by the country's flagging economy and the tumbling value of their assets.

IBCA, the London-based international credit ratings agency, which in recent months has downgraded a number of Japanese banks, said more downgradings were imminent.

Yesterday's victims included Dai-Ichi Kangyo Bank, Sumitomo Bank, Mitsubishi Bank and Sanwa Bank, whose ratings were downgraded to AA from AA plus.

The debt of Fuji Bank was downgraded to AA minus from AA. The short-term debt ratings for all five banks remain unchanged, at A1 plus.

The ratings agency said that the sharp falls on the Tokyo stock market - which has managed a sharp rally in the past few days - had put intense pressure on the capital ratios of the Japanese banks, reducing their hidden reserves and increasing potential valuation losses on stock holdings. Huge amounts of problem loans related to property were increasing and continuing to weaken the banks, IBCA added.

The sluggish domestic economy, which could trigger more general problems with credit quality, was also a concern, IBCA's Tokyo representative, David Marshall, said.

The Japanese banks' troubles at home have been matched by their withdrawal from international lending markets, a significant factor in the 40 per cent contraction in international lending in the first quarter of 1992. The Basle-based Bank for International Settlements said in a recent report that the pull-back by Japanese banks was a large contributor to an dollars 83bn dive in interbank lending in the first three months of this year.