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Major Japanese Bank to Receive $1B Capital Boost - 2003-01-17

One of Japan's biggest banks will receive a $1 billion capital boost from a major American investment bank and a Japanese trading partner launches a complaint over Tokyo's pending high meat import tariffs.

Goldman Sachs says it plans to invest nearly $1.3 billion in Sumitomo Mitsui Financial Group, giving the U.S. investment bank a seven percent stake in Japan's second largest bank. The move is likely to strengthen the Japanese lender's financial base and help clean up the $48 billion in bad loans burdening its balance sheet.

Yoshifumi Nishikawa, President of Sumitomo, told reporters that the significance for his company is in receiving funds from Goldman, an outside investor, and not just relying on existing business relationships. In return, Goldman will gain access to Sumitomo's huge corporate client base. That could offer a significant boost to its money lending and mergers and acquisitions businesses in Japan.

Sumitomo is the second of Japan's four largest banks to receive foreign help to boost capital. Merrill Lynch last month unveiled a plan to inject funds into UFJ Holdings, the smallest of Japan's four megabanks.

The latest trade figures show the country's current account surplus rose 9 percent in November from a year earlier to $10 billion. That marks the second year-on-year increase in a row. Strong exports to the United States, Europe and Asia provided a lift. The surplus in the current account measures the flow of Japan's worldwide trade in goods and services.

Japan and Australia are locked in a trade flap over beef. Australia's government is protesting a new tariff Tokyo will slap on meat imports. The tariff is set to rise from 38 to 50 percent later this year as Japan's beef industry tries to recover from a sharp fall in sales due to fears over mad cow disease. Several animals in Japan were found to have the illness, the only cases identified in Asia to date.

The Australian Cattle Council estimates the higher tariff will cost Japanese consumers $257 million and warns it will also damage Australian producers.