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Link between Takugin collapse, increased failures denied.

TOKYO, Feb. 6 Kyodo

An increase in business failures in Japan's northernmost main island of Hokkaido in the late 1990s was not attributable to a chain reaction of bankruptcies triggered by the 1997 collapse of Hokkaido Takushoku Bank (Takugin), Cabinet Office officials said Wednesday.

The office's survey of business failures for the three years after Takugin's November 1997 collapse found that 0.68% of 1,451 companies with annual sales of more than 100 million yen, which were given the highest credit ratings by private rating agencies and used Takugin as their main bank, went bust during the period, the officials said.

The ratio for 1,152 such companies that did not hold accounts at Takugin was almost the same, at 0.86%.

Of companies assigned the second-highest rankings, the bankruptcy ratio came to 2.88% and 3.07% for the two groups, respectively.

The office also traced 362 unlisted companies' loans and found no major changes in their outstanding debts regardless of whether Takugin was their main bank or not.

In addition, interest payments on debts of 138 unlisted companies that used Takugin as their main bank showed no noticeable increases or decreases in the three years before and after the bank's collapse.

Those findings contradict a commonly held belief that Takugin's collapse triggered a chain reaction of bankruptcies in Hokkaido, according to the officials.

Support by public credit guarantee associations, North Pacific Bank, which has taken over Takugin's operations, and loans provided by governmental lending agencies served as a safety net following the major commercial bank's collapse, the officials added.

The number of bankruptcies in Hokkaido topped 1,000 in 1998 for the first time in 11 years, leading to widespread views the increase was attributable to Takugin's failure. But the number across Japan surged to some 19,000, the second largest on record at that time, as a result of credit crunch and stagnant economic activity.
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Publication:Japan Weekly Monitor
Date:Feb 11, 2002
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