Delay to Japanese bad-loan proposals stymies bank swaps trading

The decision by the Japanese government this week to delay the release of drastic proposals to tackle the country’s decade-long, non-performing loan problem, caused protection on Japanese bank debt to trade slightly wider, with bid-offer spreads remaining wide, reflecting a continued lack of liquidity in the market.

Prime minister Junichiro Koizumi continued to back Heizo Takenaka, economy minister and head of the Financial Services Agency, who is behind the proposals despite widespread opposition from hardline conservatives.

But the lack of concrete measures has caused market participants to adopt a wait-and-see stance, with the cost of credit protection on bank debt widening 10 basis points from last week.

Credit protection on Bank of Tokyo-Mitsubishi five-year, senior debt was quoted today at bid-offer