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Prepared by Alexander Wolfson (ext. 35637).
The number of major banks will decline once the merger of UFJ Holdings and Mitsubishi Tokyo Financial Group is concluded later this year.
Core profitability data are calculated from detailed balance sheet and profit and loss data prepared by the Japanese Bankers Association, and cover the period from fiscal year 1979 (ending March 1980) through fiscal year 2003.
Specifications with alternative cyclical indicators such as the unemployment rate or the stockmarket index also show no evidence of a positive relationship between the cyclical strength of the economy and the level of core profits.
Schaede ascribes part of this “gap” in the interest rate structure to the role of government financial institutions in providing subsidized lending to the SME market.
According to one calculation, new loans to distressed firms are at the lowest point in over a decade (Jerram, 2005).
The public bailout of one major bank involved the adoption of an independent board of directors.
Going forward, direct competition from the GHLC should be reduced as its activities are rationalized under a reform program.