Abstract
Japan officially entered recession in the second half of 2008 with real GDP
shrinking at an annualised rate
of 3.7% in Q208 and 1.8% in Q308, and will
sink deeper into recession in 2009 as the global economy
deteriorates. Its
economy is vulnerable on four fronts (we term these ‘quadruple
shocks’): reduced
demand for exports from the US and Europe, a sharp
slowdown in China (which will also weigh on
Japanese shipments), a strong
yen (the currency surged to multi-year highs in 2008), and weak domestic
demand. While these shocks will also pervade other Asian and emerging
economies, Japan is more
vulnerable because its domestic demand has been
weaker its currency has risen so far against all others.
This report is
being written at a time when the global financial crisis, which arose as a
result of the
evaporation of inter-bank liquidity, has moved into a new
phase. Stock market participants appear,
reasonably, to have taken the
view that the policy responses taken by governments, central banks and
multi-lateral institutions will be sufficient to prevent a total collapse of
the global financial system.
Instead, stock market participants are
focusing on the impact of a near-global recession on the earnings of
non-financial companies.
The number and size of stand-by facilities agreed
by the IMF since early October supports our view that,
of the emerging
markets whose commercial banking sectors are surveyed by BMI, the countries
of
Central and Eastern Europe are those whose economies are most at risk
of suffering adverse affects as a
result of the global financial crisis.
This is partly because the macroeconomic imbalances are relatively
severe
and partly because the Central and Eastern European countries are more
directly affected by the
brutal recession that is unfolding in wealthier
member states of the EU.
As yet, it has not been possible to collate hard
numbers, for most of the countries whose commercial
banking sectors are
surveyed by BMI, that clearly quantify the impact of the global financial
crisis on the
banks. As we explain in the section that discusses changes
that we are making to the report, we again
include a lengthy essay which
attempts to identify the key issues. In essence, in the emerging markets
–
and, indeed, the developed countries – of the Asia-Pacific,
commercial banks appear well placed to deal
with the crisis. The same is,
broadly, true of commercial banks in the various countries of the Middle
East
and North Africa. Latin America, Chile, Brazil, Mexico and Colombia
appear better placed than
Argentina, Venezuela, Bolivia and Ecuador. South
Africa’s situation appears to have much in common
with that of
Brazil. In contrast, Nigeria faces some of the same challenges as those that
confront
Venezuela. The positions of most countries in Central and Eastern
Europe, however, are alarming.
From Q209, we will include data that
pertains to late 2008 and extend forecasts out to 2013. We will also
incorporate much greater discussion of the various protagonists in each
country’s commercial banking
sector and a number of new features. We
believe that the figures we compiled in mid-2008 provide
insights as to
how the various commercial banking sectors will fare in the current, extremely
uncertain,
climate. We have, therefore, left them essentially
unchanged.
The figures on the tables above provide a snapshot of the
banking sector in Japan prior to the onset of the
global financial crisis.
To place the figures in context, it may be useful to bear in mind certain
aspects of
the 59 countries whose banking sectors are currently surveyed
by BMI. Across this sample, the median
growth in assets in local currency
terms was 21.3% (in Colombia), the median loan growth was 21.6% (in
India)
and the median growth in deposits was 17.9% (in Brazil).
On their own, the
ratios of loans to deposits, assets, and GDP mean little. However, they can
provide
useful hints when combined with other data. Across the 59
countries, the median loan/deposit ratio is
92.3% (in Greece), the median
loan/asset ratio is 56.0% (in Poland) and the median loan/GDP ratio was
63.9% in India.
As in previous reports, we include a SWOT analysis for
Japan. We suggest that the two most important
strengths of the Japanese
government’s commitment to reform and the overall size and
sophistication of
the banking sector. Against this, there are weaknesses
such as the strength of the yen against most other
currencies, poor export
sales by Japan’s major high-tech companies, rising unemployment and the
recent
political instability threatening the long reign of the Liberal
Democratic Party (LDP).
Since Q108, we have calculated, on a consistent
basis, a Commercial Bank Business Environment Rating
(CBBER) for each of
the 59 countries surveyed. The CBBER includes an assessment of the limits
of
potential returns. It does this by taking into account the size, growth
potential and bancassurance potential
of the banking sector, as well as
aspects of the economy in 2007. The CBBER also depends on an
assessment of
the risks to the realisation of potential returns. This reflects BMI’s
assessments of overall
country risk, together with the regulatory and
competitive environment.
Japan’s overall CBBER is 74.0. Within the
limits to potential return, the banking elements and the
country elements
are fairly evenly rated, with scores of 73.8 and 70.6 respectively. Within the
risks to the
realisation of potential returns, the banking elements and
the country elements are quite unevenly rated,
with respective scores of
66.7 and 84.7.
|
Related Report
|
View Cart
