Monday, July 13, 2009
Gave Me Pause
Default rates on loans underlying Japanese commercial mortgage-backed securities rose to an “unprecedented high” of 53 percent in the first half, Fitch Ratings said.The crash that just keeps crashing....
“The agency expects the extremely challenging refinancing environment to continue,” Fitch said in today’s statement. “The lack of finance and the resultant forced disposition of assets are weighing heavily on the real estate market.”
The Japanese credit system has more in common with China's than with ours. Businesses get loans based on their relationships with the financial bureaucracy, not on their credit-worthiness which is (mostly) true here in the U.S., however imperfectly. If the majority of balloon payments are not being re-financed, it's because either somebody decided to stop the merry-go-round of bad loans, or because Japan is simply out of money.
Either way, it's not a collapse--it's a societal earthquake. The entire structure of Japan's political economy is shifting.
Yeah, that's just amazing.
Overcapacity is about to get foreclosed on with a vengeance.
(Reuters)-"Commercial mortgage-backed security issuance in Japan increased by 68 percent in the six months to June from the previous half-year, suggesting a recovery in the market which was severely hit by the global financial crisis, a brokerage report said."
That was just a week ago. What gives? Have the Japanese seriously started foreclosing on unprofitable businesses? That would be novel, indeed. Or are they shoveling out commercial lending faster than ever?
The ¥300 billion [H1 '09] figure is also way down on the ¥2.3 trillion in new Japanese CMBS issuance that was recorded for all of 2007, as Otani himself points out.
So, it looks like commercial mortgage lending has, indeed, collapsed in Japan.
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