Japanese credit spreads widen on corporate bankruptcy fears

Credit protection on Japanese corporate debt widened this week, as a number of hard-line reformers were appointed to a banking task force committee by Heizo Takenaka, the newly appointed head of the Financial Service Agency (FSA), the country’s financial regulators. The task force was set up to deal with burgeoning bad loans on Japanese banks' books that raised expectations of an increase in corporate bankruptcies and corporate restructuring in the country.

Hard-line reformers Takeshi Kimura, president of KPMG Financial KK, and former Bank of Japan policy board member Nobuyuki Nakahara were both appointed to the team. Last year, Kimura proposed that banks should dispose of debts to their largest and most distressed borrowers, and drew up a list of 30 corporates he believed made up a substantial contribution to the bad loans held by banks.

The markets believe the task force will introduce measures requiring banks to significantly cut their credit