Word: japanned
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...Japan learned how to handle a financial crisis the hard way. In the 1990s, after stock and real estate bubbles imploded, the country experienced a financial debacle similar to the one facing the U.S. today. The result was the Lost Decade. Between 1992 and 2003, Japan's real GDP growth averaged less than 1% a year...
...Japan now realizes the mistake it made back then: failing to act with speed and force. Loose accounting standards had allowed banks to hold soured assets on their books without writing them down to their true market value. This permitted financial institutions that were technically bankrupt to delay taking in fresh capital - a move that would have hurt existing shareholders but would have restored banks to health. The government dawdled for more than half a decade, allowing banks to carry on in a diminished capacity despite the fact that with key lending institutions crippled, the broader economy could not thrive...
...needs to recapitalize banks using taxpayer money. Only then will confidence in the financial system return, ending the current paralysis in lending that threatens the entire economy. "Taking nonperforming loans out of the balance sheets is not enough," says Jun Saito, director general of the economic-research bureau for Japan's cabinet. "What we've learned [in Japan] from the 1990s is that we need recapitalization...
...Other Asian governments faced challenges similar to Japan's during the Asian financial crisis of 1997-98. In South Korea, for example, the government bought bad loans from banks and also injected government money into their balance sheets. Several banks were nationalized. Governments across the region also shut down financial institutions deemed too weak to survive or warrant a government bailout. In August 1997 Thailand closed 42 finance companies. Indonesia closed 16 banks in October 1997, and Korea closed 14 merchant banks that December, according to Merrill Lynch. This separating the wheat from the chaff helped to speed economic recovery...
...Japan was hit hardest: Tokyo's Nikkei index fell nearly 10%, capping a week that saw Japanese shares plummet 25%, the worst weekly performance in the index's history. Investors fled after the credit squeeze claimed its first Japanese victim: Yamato Life Insurance Co., which filed for bankruptcy Friday after suffering huge losses in its securities holdings. Yamato's collapse, the first by a Japanese insurance company since 2001, sparked fresh worries about the health of the country's financial institutions. "My concern is whether the banks and insurance companies can keep standing," says Yukiko Kanoh, 53, an administrative assistant...