These two articles starkly show the difference in how Korea and Japan have been reforming their banking sectors. Korea’s banks have moved their focus to private customers instead of big business conglomerates (chaebols) and are booming. Japan’s banks continue to lend worthless money to bankrupt businesses, continuing a 12-year old recession indefinetly. What could be more clear than this comparison? Korean banks have stopped lending to bad businesses, Japan’s can’t seem to accept that it must do the same or else wallow for many more years in fiscal purgatory.
NY Times – Korean Banks Try for Edge in Furious Consolidation Fight
Five years after the country’s financial system very nearly collapsed in the wave of currency crises that swept Asia, the industry is profoundly remaking itself. Consumers have displaced conglomerates as the banks’ most important customers, and private investors are supplanting the government as their principal owners. And they are jockeying to buy one another and survive a wrenching consolidation.
NY Times – Japan’s Bank Eases Loan Rules
The eagerness of the government and the central bank to fill the void left by private lenders underlines the vulnerability of Japan’s weakest companies. According to one estimate, a rise in interest rates of just 50 basis points Û half a percentage point Û would leave one out of every five publicly traded companies in Japan unable to service its debts.