Japanese plan will hinder recovery

The action planned by the Japanese FSA to reduce banking overcapacity will have a dampening effect in the economy through a reduction in lending to Japanese corporates. Economist Andrew Smithers at Smithers & Co said this is all the more unfortunate as the Japanese economy has recently shown signs of deterioration. The impact on the stock market is also likely to be negative as companies whose debts are near the 10 times cashflow limit will be encouraged to realise assets. These are likely to include cross-holdings, which will be bad for the stock market as it alters the supply/demand i...