Run On Thrift Escalates Japanese Banking Crisis Government Tries To Calm Panicky Depositors

It’s a sight to strike fear into the heart of the most iron-willed bank regulator: hordes of people shoving their way into a troubled bank to yank out their money.

But despite the frantic run on Japan’s largest credit union Thursday, a day after it had been shut down except for withdrawals, Finance Minister Masayoshi Takemura tried to reassure depositors that the worst was over in Japan’s banking crisis.

Private banking analysts were not as optimistic.

They pointed out that the $6.1 billion in bad loans held by Kizu Credit Union in Osaka and the $8 billion held by Hyogo Bank, a major regional bank that was ordered reorganized Wednesday, represented a tiny fraction of the bad loans held by all Japanese banks.

“There is still a long way to go,” the leading business newspaper, the Nihon Keizai, predicted in an analysis.

Still, many saw the government’s swift action to reorganize Hyogo as setting a good precedent. The government is also guaranteeing deposits at Kizu, but says a comprehensive bailout plan may take months to put together.

Japanese financial markets, which originally were spooked on the news of the bailouts, regained calm Thursday afternoon. The dollar fell back after spurting to a seven-month high against the yen.

“The optimists are saying that the quick reaction of the authorities was good news,” said Takeharu Nakamura, head of equity trading at Commerz Securities.

Many waited in lines all night to withdraw their money from Kizu’s 27 branches, some of which opened for business at 5 a.m. Customers applied to withdraw about $3 billion during the day, the largest amount ever in a single day at a Japanese financial institution.