Laying the foundations

With non-performing loans under control, Japanese banks are modernising their credit risk management functions. Some firms are now taking a more proactive approach to managing their portfolios - a step that could provide a boost to the local credit derivatives market. Rachel Wolcott investigates

Japan's economy is back on a more stable footing after more than a decade of deflation, soaring non-performing loans (NPLs) and falling equity markets. Under pressure from the government, the country's banks have tidied up their balance sheets, reduced bad debt and shored up capital levels. Meanwhile, the banking community has gone through several rounds of consolidation, which has led to the creation of three so-called mega-banks: Mitsubishi UFJ Financial Group, Mizuho Financial Group and