Successive Rumors of Crisis in April... in May...

“Whew, urgent problems have been settled. But...”

`The rumor of financial crisis in March under Japan dateline, ` which pressed global economy from the beginning of this year. On the 28th, one day before the end of session in March, Japanese financial authority and market heaved a sigh of relief.

Nikkei Stock Average of Tokyo stock market in March was rather stable, and contrary to the worries, massive withdrawal of deposits didn`t happened with the abolition of the full protection of a deposit system from the beginning of April.

However, `the rumors of X month crisis` like April crisis or May crisis are still appearing, as Japanese government does not prepare a definite economic measure, and restructuring is making no progress.

▽Financial crisis settled with difficulty = Most scaring thing in the rumor of crisis in March was that Japanese finance falls into confusion with the massive withdrawal of deposits. There were no chaos from massive withdrawals, but funds of financial circles flowed from small-sized banks to large-sized banks, and from fixed deposits, which protect a principal of 10 million yen, to ordinary accounts. Hence, some small local banks were bankrupted while the balance of ordinary accounts in large banks increased by 11 trillion yen (around 110 trillion won).

Banks decreased the interest rate of ordinary accounts to yearly 0.001 percent in order to prevent the funds from flowing into ordinary accounts, as the cost of managing the funds from the ordinary accounts, from which withdrawal of money is allowed at any time, is rather high.

In relation to stock market, there came analyses that Japanese government’s mobilization of pension and national funds and the establishment of the office collecting insolvent bonds increased stock prices forcibly. As a result, Nikkei Stock Average, which went back to 12,000-yen level on March 8th, is fluctuating at 11,000-yen mark. The closing price on the 28th was 11,333.11 yen.

▽Accelerated financial insolvency = It managed to weather the crisis temporarily, but financial insolvency became more serious.

All the 12 banks are likely to go into red at the settlement of accounts at the end of this month with the scale of insolvent bonds extended.

Along with the 3 banks of TokyoMitsubishi, Mitsubishi Trust, and Sumitomo, which were anticipated to go into black at the semi-settlement of accounts at the end of September last year, finally falling into red, all the 12 banks are estimated to go into red by over 2 trillion and 500 billion yen.

In addition, the insolvent bonds they have reach 24 trillion yen mark, which increased by 40 percent from 17 trillion and 680 billion yen at the end of March last year. They cleared insolvent bonds of 7 trillion and 500 billion yen, one trillion yen more than expected, during last year, but insolvent bonds are piled up due to lasting recession.

▽The rumor of crisis going on = As Japanese government thought that it passed over the `rumor of crisis in March`, it postponed the preparation of succeeding measure against deflation to next month, which originally expected to be in this month. Japanese central bank, the Bank of Japan decided to maintain the status quo without any succeeding financial alleviating measures at the financial policy meeting on the 20th.

However, there are lots of complaints in the market that `it is leaving problems unfinished`. They are worried that the crisis would last, when major enterprises announce the settlement of accounts in March in the next month, though the crisis of this month was fortunately overcome. Weekly economic magazine Nikkei Business on the 25th carried a special article titled ` The crime and punishment of the postponement of economic measures... repeating crises`.

Young-Ee Lee yes202@donga.com