Thursday, September 25, 2008

Japanese Banks in the lime Light

While the US and European banks are barely managing to stay afloat, Japanese banks are beginning to flaunt their might. This has been amply demonstrated in the past few weeks when Mitsubishi bought a 20% stake in Morgan Stanley and Nomura acquired Lehman’s assets in Asia.

Ironically, while the excesses of the 1980s made the Japanese banks flounder, consequently taking them considerable time to recover from the same, it is this very fact that has more or less insulated them from the subprime malaise which has badly afflicted US and European banks. During the boom, Japan received a lot of flak for making acquisitions in the US at inflated prices, which over a period of time the Japanese banks found difficult to digest.

But the US financial system at that time was robust. The scenario has reversed now. While the credit crisis has helped Japanese banks acquire stakes in US banks at attractive prices, the health of the US financial sector is now in question. Therefore, how the Japanese banks will integrate these acquisitions assumes considerable importance given that cultures in both the countries are like chalk and cheese and the fact that the financial sector in Japan is just beginning to witness signs of revival.

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