Japan Credit Update: Japanese banks widen on Nikkei drop

Credit protection on Japanese banks widened by about 20 to 30 basis points (bp) this week, as the sharp drop in the country’s equity market put pressure on bank margins and financial ratios.

Earlier Friday, the Nikkei 225 Stock Average index broke through the 9000-level to a 19-year low of around 8970. The index has since climbed back above the 9000-level, closing at 9129.07, but observers say that it will likely remain under pressure in coming days because of weak economic indicators and general nervousness in global markets ahead of the September 11 anniversary.

The meltdown in Japanese stocks renewed concern that Japanese banks’ financial ratios would deteriorate ahead of the