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TOKYO, Dec 13: A senior US State Department official has encouraged his Japanese counterparts to establish a system where bad loans can be traded among investors to help revitalize Japan’s moribund economy.
Business people, attorneys and government officials from Japan and the US met in Tokyo on Thursday for the first round of working-level talks aimed at improving the environment for foreign direct investment on both sides of the Pacific.
Among a range of topics discussed, the participants spoke about the need to push corporate Japan to process bad loans and have assets traded in the market place, the official, who declined to be named, said.
“There is a critical need to move under-performing or non-performing loans to the market and to create a liquid market for those assets,” he said. “We think by putting assets in the market place, we will see a turnaround (of the Japanese economy).”
But Japanese firms had to change their methods of conducting business to achieve this goal.
“Many Japanese companies with low-to-no (returns on assets) are getting financing from banks,” he said, adding this did not encourage debt-ridden corporations to reform, thus burdening the entire economy.
Some firms fear selling their assets, especially real estate, because they believe it will eventually lower the prices of other assets, said the official, adding Japanese firms in general have lacked economic incentives to put themselves on the auction block.
Historically, Japan has received little foreign direct investment due partly to its business culture, which valued management more than shareholders, said the official.
However, he was encouraged by recent cases where large non-Japanese firms in telecommunications, pharmaceuticals and retail sectors bought large stakes in Japanese companies.
The official said the United States strongly supported reform initiatives advocated by Japanese Prime Minister Junichiro Koizumi, but remained “frustrated” at the snail’s pace of implementation.
INVESTMENT SOUGHT: The head of Nasdaq Stock Market Inc. on Thursday urged Japanese to take their savings out from under the bed and invest in stocks to bolster Japan’s faltering economy.
More than half the US public invested in stocks compared with only 15 per cent of Japanese, said Hardwick Simmons, chairman and chief executive of the technology-dominated US equities market.
“With the Nasdaq and the Nasdaq’s tendency to democratise the market to bring a fair, equitable and transparent market at a low cost basis for individuals, we can help Japan — which has enormous amount of savings — to put those savings in equities,” he told journalists here.
“We can help Japan open its markets and create a whole new group of shareholders,” said Simmons, adding such a shift would help revitalize flagging Japanese share prices.
The Nasdaq traditionally attracts younger investors who can tolerate risks to invest in “growth stocks,” said Simmons.
The electronic trading platform also makes geographical boundaries less important.
“A secret to (attracting younger investors) is the trading platform,” he said. “The market is so transparent.
“If we provide the same kinds of capabilities that we provide in the United States, my guess would be that we can significantly enlarge the pool of investors here in Japan.”—AFP
