MercoPress. South Atlantic News Agency

Japanese banks feels the fallout from US subprime crisis

Japanese banks are feeling the fallout from the US subprime mortgage crisis and the credit crunch, according to the country's financial watchdog.

The Financial Services Agency, FSA, said losses stemming from US sub-prime lending increased by 41% to 850bn yen (8 billion US dollars) at the end of March. Total losses on investments related to risky mortgages were far bigger amounting to 23 billion. But FSA said Japan's sub-prime hit was not as severe as in Europe and the US. Losses at Japanese banks have been dwarfed by those suffered by US and European rivals, such as Citigroup and UBS. But the sector still has been exposed to losses from investments in high-risk financial products, such as residential mortgage-backed securities and collateralized debt obligations. Japan's second-largest lender Mizuho Financial Group, the hardest hit so far, lost 6.1 billion US dollars on sub-prime-related investments in the year to March. The country's third biggest lender, Sumitomo Mitsui Financial, made losses of 875 million in that period while the country's biggest lender, Mitsubishi UFJ Financial, sustained 763 million in losses. As well being battered by the US housing crisis and the global credit crunch, Japanese firms are also affected by the wider economic slowdown in the US, as America is Japan's biggest export market. Economic growth, which started to recover last year after a decade-long downturn, is also being dented by the rising cost of oil and raw materials. Earlier this week, the Organisation for Economic Cooperation and Development said economic growth would be moderate at 1.7% in 2008. The economy grew 1.5% in the year to March, and 2.5% the previous year.