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Jitters in Japan for Savers and Banks
On Monday, Moody’s Investors Service lowered the deposit ratings for five regional banks and downgraded the outlook for Japan’s biggest banks to negative from stable. Moody’s (news/quote) said it “considers the Japanese banking system to be in a grossly inadequate financial shape to meet the new challenges from a changing systemic support mechanism.”
Starting in April, fixed-term deposits at any single bank will be insured only up to 10 million yen ($75,466) for each saver, a system similar to that of the Federal Deposit Insurance Corporation in the United States. Ordinary savings accounts will be treated the same way beginning in April 2003

O’Neill Ends Trip With Call for Japan to Reform
“The straight fact is this: exchange rates cannot improve productivity or fix non-performing loans,” he said. “The weight of historical evidence shows that those who have tried to fix underlying economic problems with protectionist measures – and I count artificially depreciating the currency as one of those – actually weaken their own economy.”
The US is urging the Koizumi government to move quickly in three areas. First, Mr O’Neill called for an ambitious effort to resolve the problem of bad debt held by Japanese banks by government efforts to sell the loans at whatever they can fetch in the market and absorb the losses. Secondly, he backed further efforts to combat deflation through monetary policy, which he said would be necessary to allow other reforms to take place. Finally he said that a series of adjustments should be made to trade, regulatory and financial policies to introduce price competition into Japan’s domestic economy. He pointed out that Japanese companies that compete in international markets are highly competitive and said the same competitive pressures should be introduced into the domestic economy.

More bad news for Japan. It seems neverending…