Turning up the heat

Japan’s banks have faced a gruelling few months in the run-up to the fiscal year-end, with a plunge in equity prices putting severe pressure on capital ratios. But a further crisis may be just around the corner, writes Nick Sawyer

The approach of the 2002 fiscal year-end has been one of the most critical Japan’s banks have ever had to face. The Nikkei 225 stock index has tumbled to 20-year lows in the run-up to the crucial March 31 year-end, sharply inflating unrealised losses on the banks’ vast equity holdings, and putting acute pressure on their capital adequacy ratios. At the same time, the country’s financial institutions have been under fierce pressure to accelerate the disposal of non-performing loans