Consumer Lender Woes in Japan

Earlier today, Japan's second largest consumer lender, Takefuji sought legal protection of bankruptcy. The source of its woes, and apparently others in that space, is that the borrowers were overcharged interest.

Japan's regulator says that Japanese consumers were overcharged some JPY4.4 trillion. Takefuji has over a million clients. About 113k have already filed claims to be reimbursed some JPY171 bln from Takefuji and some estimates suggest the figure could rise toward JPY1 trillion. Takefuji is the second largest bankruptcy in Japan this year behind Japan Airlines. There three other large consumer lenders in Japan and their share prices have also fallen. They are Aiful, Promise and Acom. Promise appears to be the only one that owned in part by a bank, which some observers think fare better because of that.

The customers of the Japanese consumer lenders tend to be from lower income households and the problems in that space, including today's bankruptcy filing, is likely a negative for consumer sentiment. Although we note that most Topix companies went ex-dividend today, the Topix Bank share index was is within remains near the multi-year low set earlier this month.

The dollar is trading near the 61.8% retracement of the intervention inspired gains. It is found at JPY84.05. In addition to the interest rate differential story, participants are looking forward to the Tankan survey being released first thing Wed in Tokyo. Besides the headlines, which are expected to show some improvement, observers may be focus on the forward looking components like capex and Dec outlook.